Next Five Years: Predictions for the Housing Market

The U.S. News & World Report has just come out with its housing market predictions. And it has a few zingers.

Take a look.

Cars and the Suburban Housing Market

For several years running, we’ve seen the power of a pandemic to press people out of the cities. But cities could regain their allure in the near future — because of the cost of driving.

The U.S. News & World Report predicts that “the total cost of owning a car is likely to rival many homeowner’s mortgages” between now and 2028, because of:

EVs. Electric power and other technology, along with subscriptions to driving-related software, should keep cars pricey.

Insurance. Year over year, the report says, car insurance prices are up about 20%. Disasters or weather-related damage to cars play a role.

Global conflict. Fuel prices and manufacturers’ supply chains may be at risk.

We hear so much about cutting-edge cars. Yet the News & World Report says we could see “a return to urban areas with robust public transit systems and ride sharing options in which car ownership is no longer necessary.”

Technology and the Future of Building: Watch AI

Expect artificial intelligence to generate a rapid spread of home building techniques that were niche until now. Look out for:

More 3D printing in home building.

More pre-fabricated home parts.

Technology that makes efficient use of resources, prevents waste, and emits less.

Software that detects structural safety issues.

Of course, technology impacts more than physical buildings. We’ve also been watching how, for example, AI can help people become homeowners by introducing tools to simplify home financing and make mortgages more accessible.

Intergenerational Households, Co-Owners to Become Increasingly Common

More buyers will go in on home purchases with family or friends, the U.S. News & World Report predicts. This means we may be seeing more deeds vested as tenancies in common.

The report also predicts a rise in multigenerational homes: chosen families, and homes with younger generations returning to the nest.

How do people in a nontraditional households share their home’s value and costs? How do they pass their deeds on? Explore how multigenerational households vest their deeds.

We’ve noted how corporate investors have helped keep people renting, unable to save for homes if they want to. The strategy of co-borrowing a mortgage does help renters acquire their own deeds. People can put their resources together to buy homes and start building equity.

Shortages to Gradually Ease, Thanks to Builders and Boomers

By 2030, the housing supply is expected to fill the current vacuum. With more and more homes coming onto the market, demand for building will cool.

For multiple reasons, supply is expected to rise up and meet demand:

Builders, particularly in Florida and Texas, have been producing large volumes of homes in recent months.

Millions of homes are on the verge of coming back to the market as baby boomers give up their deeds. And finally…

Lower interest rates will encourage more people to put their current homes up for sale.

Barring any surprises, then, the U.S. market should be able to move into a relatively balanced state.

Regional and Environmental Trends (Watch Insurance Prices)

Where could we be looking at more rises in property values in the next few years?

“The hottest housing markets in 2028 may look a bit different from early 2024,” says U.S. News. Many of the most popular markets are expected to be in New England. New York, too, is very much in play.

According to a different report from CoreLogic® (dealing with March 2024 figures), four of the top five states for rising home values are in the Northeast. In order: New Jersey, New Hampshire, Connecticut, and Rhode Island. All rose more than 9%. Home values are expected to hold up well in the Northeast. One big reason? The region’s households are generally on strong financial footing, able to handle insurance and other costs.

In every region, swelling insurance rates are changing the math of acquiring a deed. For the coastal states, and around tidal rivers, look for possible flood risks. For the South and Midwest — and just about everywhere — be aware of stronger storms. For California and the Midwest, know the wildfire risks. The Southwest has longer periods of drought. And so on.

The RiskFactor.com website is designed to let owners and investors flesh out their due diligence. Buyers in the years ahead must consider the impact of unplanned incidents. This includes things like checking the cost of flood insurance (not covered in standard policies).

Interesting Times. OK, What About the Next Few Months?

Last year, the volume of real estate listings was as low as any time in 28 years. But this year, assuming interest rates come down from their recent highs, more people will list their homes, and more people will want to buy those homes.

Interest rate cuts haven’t come soon enough this year to really keep the buying season revved up. New predictions for federal rate cuts (September cuts are now predicted) do open up some possibilities for the second half of the year.

Fannie Mae expects the 30-year mortgage rates to drift downward to 6.4% by December 2024. Great! But rates must be well under 6% for many current deed holders to let go of their mortgages (unless they absolutely must sell earlier).

According to the U.S. News report, interest on the popular 30-year fixed mortgage is due for a gradual drop, until bottoming out at about 5%. It shouldn’t dip lower, given “rising government debt in the U.S. and around the world crowding out the availability of financing.”

Meanwhile, U.S. home prices are likely to remain stable or increase gently in many markets throughout 2024.

Looking Ahead, Buying Smart

Homes bought now could be in high demand in 2024 and 2025, assuming interest rates settle down somewhat. Homes should continue to be a good investment over the coming five-year period, according to U.S. News.

During the next few years, up through 2028, expect home prices to rise, but not so fast. U.S. News projects an overall rise in home prices across the country to around 13% to 14% above their 2023 values.

That’s good to know in general. Additionally, keeping a watch on how and where homes stand to gain or face risks is important to every deed holder. Potential real estate appreciation could be a very good reason to buy in certain regions, counties, or townships.

Supporting References

Patrick S. Duffy for U.S. News & World Report: 2024-2028 Housing Market Predictions: A Gradual Thaw With Added Challenges (Jan. 23, 2024; citing the National Association of Home Builders and other sources).

CoreLogic® HPI™ May 2024 press release.

RiskFactor.com from First Street Foundation, a nonprofit climate risk data provider.

Justin Grant for Mortgage Capital Trading via MCT-Trading.com: Housing Market Predictions 2024 – Will House Prices go Down in 2024? (citing U.S. Bureau of Labor Statistics and the MCT Capital Markets Survey conducted in March 2024).

Deeds.com: Indianapolis Rising: Where the Investor Buyers Are Going and Why (Nov. 3, 2023).

And as linked.