The US Housing Drought Is Ending. What Does It Mean for Prices?
There are growing signs that the supply of new and resale homes on the market will pick up in 2024, taking some of the steam out of prices.
The US has a dearth of housing.
Photographer: Allison Joyce/Bloomberg via Getty Images
The story of US housing for hopeful buyers in 2023 has been one of frustration. A lack of supply has stabilized a market where affordability remains challenging.
Homeowners with low mortgage rates have chosen not to sell, putting builders of new houses in a stronger position than they had anticipated last autumn when interest rates were surging and the market slowed. While I wouldn’t count on supply conditions getting easy any time soon, there are growing signs that the picture in 2024 should be better, or at least “less bad.”
Let’s start with new homes. Builders braced for a challenging 2023 only to find that they were in some ways the only game in town in a supply-constrained market. Resilient prices have given the industry more confidence to increase production. A gauge of the market for new houses from the National Association of Home Builders and Wells Fargo, which measures sentiment on a scale from 0 to 100, surged from 31 in December — representing deep negativity — to 56, suggesting moderate optimism. Single-family housing starts have risen. Healing supply chains have shortened the time to build homes, meaning the ramp up in construction that's underway should put more completed homes on the market by the first half of 2024.
The resale market, which historically accounted for about 87% of all homes for sale and has seen an acute lack of inventory, is where a pickup in new listings would be most welcome. To be clear, I’m not looking for a wave of fresh supply, but any growth right now would be helpful — something we should start to see early next year.