The Reason US Home Prices Could Stay High

By: Anneken Tappe · February 13, 2024 · Reading Time: 2 minutes

The Fed’s Role

The Federal Reserve is expected to cut interest rates this year, alleviating pressures on any borrowers who recently locked in a rate. Mortgage rates, for example, may fall as the Fed’s stance changes from tightening to loosening monetary policy.

But mortgages are just one piece of the puzzle for prospective home buyers. And there’s another key reason why the market may remain tricky.

Structural Shortage

The median U.S. home prices remain north of $400,000, or 40% above the pre-pandemic level, according to some estimates.

The primary reason today’s housing market is so unaffordable is a lack of supply. There simply aren’t enough housing units to stem the demand, and the estimates are in the millions. In 2019, before the pandemic-era labor and material shortages, Fannie Mae said 3.8 million was a “good estimate” of the shortage. Other estimates are much higher.

Mortgage rates have contributed to this shortage in that homeowners who locked in historically low rates during the pandemic have little incentive to sell and incur a pricier mortgage to live elsewhere. Other factors, including land-use regulations and the rise of remote work are also leaving their mark on the housing deficit. So lower mortgage rates alone likely won’t fix it.

Bottom Line

Lower interest rates could provide some relief to first-time homebuyers, and perhaps spur a short-term flurry in buying activity, which in turn could put renewed pressure on prices.

In its forecast for 2024, Freddie Mac sees more of the same, predicting U.S. home prices on the whole will rise again this year, but that lower mortgage rates will leave a mark over time, potentially improving market conditions for 2025.

Looking for more stories like this? Check out On the Money —SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

TLS 1.2 Encrypted
Equal Housing Lender