There are not many signs of 'thawing' in the US housing market

Entering the new year, the US real estate market has not escaped the usual difficulties: high mortgage interest rates, scarce housing supply and increasingly distant affordability.

The US housing market has not shown many signs of "thawing" - Photo: REUTERS

Positive signal but not enough

The US housing market has shown some signs of improvement since late 2024. The number of homes for sale has increased continuously in the four months to November 2024, bringing hope that the market will gradually recover after two years of near-freeze.

According to experts, homebuyers are gradually adjusting their expectations, no longer waiting for interest rates to fall sharply to own a home. In some areas, especially the South - where housing supply is more abundant and employment opportunities are more abundant - the number of pending homes for sale increased by 5.2% in November 2024.

“Mortgage rates have been above 6 percent for the past 24 months, and buyers no longer expect rates to fall significantly in the near future,” said Lawrence Yun, chief economist at the National Association of Realtors (NAR).

Mortgage rates fell slightly in the summer of 2024, before the Federal Reserve cut its benchmark interest rate for the first time in four years. However, mortgage rates remained at multi-decade highs, nearing 7% at the end of the year, causing mortgage applications to fall nearly 22% by the end of December.

“We no longer expect mortgage rates to fall to 5% by 2025 or even the year after that. Rates are likely to stay around 6% for the next two years,” Robert Reffkin, CEO of Compass, told CNBC.

Pressure from policy and macroeconomics

Broader economic uncertainties are also weighing on the housing market, particularly the risk of inflation from President-elect Donald Trump’s economic agenda. Economists worry that taxes, tariffs and immigration restrictions could push up consumer prices.

Builders say Mr Trump’s plan to deport undocumented immigrants on a large scale could deplete the US workforce, which relies heavily on immigrants, slowing construction and raising housing prices.

However, some are skeptical that the new administration will be able to carry out these strict measures.

Meanwhile, the bond market has priced in policy uncertainty, and since mortgage rates are set based on the yield on 10-year government bonds, homebuyers waiting for a sharp drop in interest rates may be disappointed.

High interest rates have pushed home affordability to its worst level in decades. For the median-income family, affordability has hit its lowest level since 2006, the Atlanta Fed said.

An October 2024 NBC News analysis found that about a quarter of new homebuyers with median incomes — double what they were a decade ago — are financially burdened by spending beyond their means.

“The persistent rise in home prices and interest rates has created a difficult environment for both first-time buyers and upgraders,” said data firm CoreLogic. Many existing homeowners who borrowed at low interest rates are now “trapped,” exacerbating the housing shortage.

A Glimpse of Hope for 2025

Still, CoreLogic said some new homes are coming to market in high-demand areas like Florida and Texas, which it sees as a “small glimmer of hope” for a more balanced market in 2025.

According to analysts, in the next five years, the consequences of the COVID-19 pandemic will gradually give way to potential impacts from the administration of President-elect Donald Trump.

In addition, the expansion of artificial intelligence (AI) into other fields and the gradual disintegration of the rules-based international order that focuses on global trade flows will also affect the real estate market.

However, none of these factors will have as much of an impact as mortgage rates. If rates remain relatively high, transactions will be more dependent on households moving due to job changes, financial circumstances or demographic changes.

If mortgage rates can fall more quickly, the pent-up demand of the past few years could be released and volumes could return to pre-pandemic levels.

Source: https://tuoitre.vn/chua-co-nhieu-dau-hieu-tan-bang-tren-thi-truong-nha-o-my-20250104002329238.htm