Home price hikes expected in 2024

Even though the U.S. housing market will continue to be anemic during 2024 due to affordability challenges and a tough economic environment, values should rise on an annual basis, Fitch Ratings said.

"Fitch expects national home prices will remain relatively stable despite worsening affordability as the constrained housing supply supports home prices," said a report from Robert Rulla, the company's senior director. "Higher unemployment will also further erode consumer confidence, a key factor in home buying decisions."

Several mortgage industry economists have held to expectations that the U.S. will enter a recession next year.

New homes will be the bright spot, as builders will be able to offer interest rate buydowns to attract consumers, Rulla said.

Fitch said it expects one more boost in short-term rates by the Federal Open Market Committee before holding at that level for the future, but it did not predict when the Fed would act. The markets are not expecting an increase to take place at the December meeting.

"The 30-year mortgage rate is likely to stay elevated, absent a reversion of the spread between 30-year mortgage rates and 10-year Treasury yields to historical levels," Rulla said. "This, combined with flat to slightly higher home prices, will continue to pressure affordability."

The rating agency revised its outlook on home prices to rise between 2% and 5% this year and from flat to an increase of 3% in 2024. Previously, it expected prices in 2023 to be down by 5%.

CoreLogic's House Price Index for October grew by 4.7% on a year-over-year basis. Its forecast for 12 months from now is for a 2.9% rise.

Compared with September, prices rose by 0.2% but it is expecting them to remain flat between October and November.

"Home price growth maintained its upward momentum in October, which continues to reflect gains from the strong spring season and contrasts with last year's home price declines," Selma Hepp, chief economist for CoreLogic, said in a press release. "But even with high mortgage rates, October's price gains line up with historical trends and speak to the strength of some potential buyers' purchasing power, as they continue to outnumber available homes for sale."

But Redfin has an opposing view, expecting prices to fall by 1% during the second and third quarters of 2024. It would be only the second annual price decline since the Great Recession. 

"Home prices will still be out of reach for many Americans, but any break in the affordability crisis is a welcome development nonetheless," Redfin said in a press release.

Prices dropped year-over-year for October in four states, CoreLogic reported: Utah (-1.6%), Idaho (-1.4%), Montana (-0.5%) and Texas (-0.2%).

On the other hand, the northeast had the three states with the largest annual increase in values: Connecticut, 10.3%; New Jersey, 9.9%; and Rhode Island, 9.7%.

"Metros that are seeing relatively stronger price gains are those with higher job growth, as well as those with an influx of higher-income, in-migrating households," said Hepp.

Miami posted the highest year-over-year increase of 20 tracked metro areas in October, at 8.8%, with Detroit second at 7.7% and St. Louis, 7.6%.