Why Home Prices Haven’t Crashed Yet | 2024 Housing Market Forecast

Why haven’t home prices crashed yet? Will there be a housing market crash? Will home prices crash in 2024? These are the questions many people are asking. And unfortunately, you’ve been lied to! So what’s really going on with real estate and home prices? Here’s the truth! When looking at 2024 housing market predictions and trying to come up with a 2024 housing market forecast, you have to look beyond the broader economic trends and really dig deep into the stuff nobody is talking about. It’s well known that the 2023 housing market bubble has made housing prices the most unaffordable in history. But why? And how does this affect the stock market? These questions and more are answered in this video.

In order to make an accurate housing market prediction for 2024, we first must understand why home prices have not yet fallen. And more importantly for you, you need to understand how the housing market is related to the stock market, because these two are very intricately intertwined. And if the housing market crashes in 2024, then the stock market will most likely crash as well.

I’m Stock Curry. I’m a former Merrill Lynch and Morgan Stanley investment banker with over 25 years of trading experience. I’m also a former mortgage broker, having run a mortgage brokerage company in 2008. And I’m going to share with you the secrets of what’s going on that nobody else is talking about. We’re going to move past the lies from the Federal Reserve, and I’m going to tell you the truth.

The S&P CoreLogic Case-Shiller National Home Price Index was just released today, and it showed that home prices hit a record high in September. The S&P CoreLogic Case-Shiller National Home Price Index, which measures home prices across the nation, rose 3.9% from a year earlier in September. The September level was the highest since the index began in 1987. That means home prices are now the highest in history. But what has so many people baffled is why home prices keep rising, even as mortgage rates surge.

As the Federal Reserve raised interest rates, they did so in order to fight inflation, and this was supposed to cause the prices of things to come down, especially the price of homes, which hit a record high in 2021. Record high home prices, combined with extremely high mortgage rates, have made homes the most unaffordable in history, with records going back to 1987. Now, the Federal Reserve claimed that as mortgage rates rose, this was going to cause demand to go down, which in turn should have caused home prices to go down. But as we look at home prices reaching record highs, we now know that was a lie.

It’s true that home sales have fallen. Home sales fell to a new 13 year low in October. A combination of high prices and high interest rates combined to cause purchases to plunge, as home buyers were no longer able to afford homes. Home buying affordability sits near its lowest level in decades, pushing many buyers out of the market. Existing home sales for the full year in 2023 are on track to be the lowest since 2011. Existing home sales, which make up most of the housing market, decreased 4.1% in October from the prior month to a seasonally adjusted annual rate of 3.79 million, which is the lowest rate since August 2010. October home sales fell 14.6% from a year earlier.

Now, if you remember your supply and demand graphs from high school… as demand goes down, this is supposed to push prices down in order to meet that lower demand. But that hasn’t happened. Demand is down 14%, and yet prices are at record highs. So what’s going on here? Why haven’t prices come down like the Fed said they would? Well, when it comes to the slowdown in housing demand, this year’s housing market slowdown is due to the Federal Reserve’s efforts to curb inflation and cool the economy by raising its benchmark interest rate to a 22 year high. But because home prices have not yet come down, despite a significant decline in demand, the Federal Reserve’s relentless attack on inflation is now jeopardizing our housing market. So if the Federal Reserve raised interest rates in order to get mortgage rates up, which in turn made homes unaffordable, which in turn caused buyers to leave the market, killing demand for housing, why haven’t housing prices fallen yet?

The reason why home prices have stayed so high is because current homeowners, carrying mortgages that are far below today’s rates, are unwilling to move, and that has placed severe constraints on the supply of homes. In the same way that high mortgage rates have caused buyers to leave the market, high mortgage rates have also caused sellers to leave the market. Most homeowners today are locked in at interest rates of around 3%, and people don’t want to move out of their home that they’re paying a 3% mortgage rate on, into a new home that they’re going to have to pay an 8% mortgage rate on. Because even if they bought a house for the exact same price as they sold their current house for, their monthly mortgage payment would rise by almost double. And people don’t want to double their mortgage payment for a house that’s the same, or even smaller than what they have now. This is causing homeowners to stay put and not sell their homes. As a result, the supply of homes has come down significantly.

What that means is if mortgage rates come down, today’s high home prices won’t be sustainable. Absent the supply constraints in the housing market, it seems likely that prices would be a lot lower than where they are today. Going back to your supply and demand graph from high school… when supply goes down, this pushes housing prices up. But we haven’t really seen housing prices rise. What we’ve mostly seen is housing prices stay the same. And the reason for this is lower demand from buyers, which is putting downward pressure on home prices. At the same time, low supply from sellers is putting upward pressure on home prices. And it just so happens that with high mortgage rates, the amount of buyers has gone down by the exact same amount as the amount of sellers has gone down. And with both demand and supply falling by the exact same amount, housing prices have stayed the same. The lower housing prices that we would get if demand went down is being offset by the higher housing prices that we would get if supply went down, and with both supply and demand going down at the same rate, housing prices are staying the same.

But over the past few weeks, mortgage rates have started to come down. And this is going to make the 2024 housing market look very different from the 2023 housing market. The reason for that is that lower mortgage rates are going to cause an influx of both buyers and sellers. According to a recent report from Redfin, home sellers have started to jump off of the sidelines. New listings have stabilized, ticking up slightly since the beginning of September. They’re still down 7% from a year earlier, but that is the smallest decline since July of 2022. So we’re starting to see home sellers come back into the market, but we’re not necessarily starting to see home buyers come back into the market. And the reason for that is because home prices are still extremely unaffordable.

The threshold for an affordable house is for mortgage and other housing payments to be 30% of household income. As of September, this measure showed that for the median household income, the median priced home was nearly 50% too costly to be considered affordable. That means that in order for buyers to come back into the market, either housing prices would have to fall by 50%, or mortgage interest rates would have to fall by 50%, or some combination thereof. Let’s say mortgage rates fell all the way down to 5% versus September’s 7.2%. If that were to happen, the Atlanta Fed’s measure shows that housing costs would still be 25% beyond affordable. Now, one way to make the numbers work at a 5% mortgage rate would be to boost household incomes by 25%, which isn’t going to happen. The other way would be to drop home prices by 25%.

So in theory, if the Fed does keep interest rates higher for longer, and if they continue to do quantitative tightening where they’re selling off their mortgage portfolio, this is going to keep interest rates, and mortgages, higher for longer. And if mortgage rates do come down to 5% and then stay there, housing prices are going to have to come down by 25% in order to make homes more affordable. And as we enter the busy spring housing season, we are expected to get an influx of sellers who are tired of sitting in their homes. They’re tired of waiting for mortgage rates to come down. They’re giving up. They’re going to sell their homes, take all the profit they have, use that money to put a down payment on a new home, which is going to cause an influx of sellers, but not an influx of buyers.

And as supply increases but demand stays the same, this should have the effect of causing home prices to go down. Now by how much? Nobody really knows. But between mortgage rates and housing prices combined, home affordability needs to come down by 50%. It could be a 50% drop in mortgage rates. It could be a 50% drop in housing prices. It could be a combination thereof, a 25% drop in mortgage rates and a 25% drop in housing prices, or anywhere in between.

Now the important thing that you need to understand is the interaction between the stock market and the real estate market. To help explain this, consider what happened in 2008 during the stock market crash. The stock market took such a serious blow that the housing market also ended up in ruins. Many people lost their jobs during this time. The economy was in shambles, and the stock market was in a serious recession. But over time, as the stock market started to improve, more and more people started to buy houses again and use those houses for investments.

As you might remember, the stock market bottomed out in 2009, but the housing market did not bottom out until 2010. The stock market actually precedes the housing market. Whatever happens in the stock market affects the housing market. The fact is, the stock market and real estate are more closely intertwined than most people realize. The stock market and the housing market tend to have a stabilizing effect on each other. As the stock market goes up, this gives people a lot more money and profits in their stock market portfolios, and in turn, they tend to pull that money out of the stock market and use it to buy houses. But as the stock market goes down, this causes people to have less money in their stock market portfolios. This causes less people to buy houses.

And as the stock market goes up and more people buy houses, this causes home prices to go up. But as the stock market goes down and less people buy houses, this causes home prices to go down. And as the stock market rallied in 2021, we saw home prices rally to record highs as well. When the stock market crashed in 2022, we saw home prices come down as well. And as the stock market has rallied once again in 2023, approaching new all time highs, we are seeing housing market rally and approach new all time highs as well.

Now as far as a prediction for 2024, I don’t necessarily think we’re going to get a major crash in home prices. I think what most likely is going to happen is, as we’ve seen both supply and demand fall as mortgage rates went up, I think we are going to see both supply and demand rise equally as mortgage rates come down. And I think this is going to keep housing prices fairly stable. We might see a drop of about 3% to 5%, but I don’t think it’s going to be that 25% to 50% crash. The reason is, we didn’t see housing prices go down as mortgage rates went up. We saw them stay the same. And what history has shown us is that as mortgage rates change, this has an equal effect on both buyers and sellers at the same time. Meaning that if mortgage rates go down, this should have an equal effect on both buyers and sellers at the same time, causing more buyers and more sellers to enter the market at the same time, which should cause home prices to stay relatively the same. Now as mortgage rates come down, this is going to make houses more affordable, which is going to bring more buyers into the market. It’s also going to incentivize more people to sell and move. And in turn, everything’s just going to wash out. The Fed is not going to cause home prices to come down and lower inflation like they said they would. That was a lie. The truth is, home prices should remain elevated. And as home prices remain elevated, this should also keep the stock market elevated.

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