BUSINESSMANAGEMENTREVIEW.COMOCTOBER 20249and supply chain issues that followed really put the country behind the curve in terms of keeping up with population growth and housing demand. Prior to 2008, there were excess housing houses than needed borrowers. Today, we have borrowers needing houses. It's simple supply and demand economics.For many individuals who are already in homes, they now enjoy rock bottom long-term fixed interest rates, thanks to Federal Reserve policies during COVID. When you combine that with the stringent qualification standards in effect today, you have one of the most solid footing you can build for the housing market. Simultaneously, thanks to the rapid rise in wage inflation, borrowers, more than at any time in history, can afford to make their mortgage payments.Thanks to higher wages, lower rates, and a limited supply of housing, real estate prices rose very rapidly throughout the pandemic and now years after. The economics are very compelling, and the risk of home price depreciation is very low.HOUSING MARKET INSIGHTS FOR 2024The housing market in 2024 is likely to look quite different from how it has evolved from the days of COVID until today. With the recent rapid rise in interest rates, are we at risk of material price deterioration in housing? The short answer is no, however, there are some forces at work. Rising rates certainly are eroding affordability, which is a concern. The Federal Reserve's aggressive policies to attack inflation head-on are having unintended consequences, and reducing affordability is one of them. That will put downward pressure on home prices. On the other side of the higher interest rate coin is the fact that those same higher borrowing costs are reducing the production of homes, creating more supply issues that put upward pressure on home prices. Lastly, the job market continues to maintain its strength, pushing wages higher and higher, which helps support part of the higher borrowing cost issues for potential homeowners. There are a lot of forces at work right now, but at the end of the day, the housing supply remains low, and eventually, the Federal Reserve will have to bring interest rates back down, which will be welcomed by the housing industry. That will keep home prices from any material drop. THE RECENT RUNUP IN HOUSING PRICES IS A COMBINATION OF A LOT OF FACTORS, NONE OF WHICH ARE SIMILAR TO THE MARKET BEFORE 2008
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