Housing Market Update – January 31, 2024

National Home Data

The Case Shiller Home Price Index showed that home prices fell 0.2% in November. Home prices have risen substantially since January and are on pace for prices to rise more than 5.0% this year.  Year-over-year prices are up 5.2% and continue to set new all-time highs despite the month-over-month decline. While the press is making a big deal about the November decline, it’s important to note that homes that closed in November, for the most part, came under contract in October when rates reached their 20+ year highs, hitting 8%. Since then, rates declined by over 1% which should help reverse the decline in future months. Appreciation has shown a surprising amount of resilience, given that rates hit 8% in October, combined with a generally slow time of year for home sales. 

FHFA (Federal Housing Finance Agency) also released its House Price Index, which measures home appreciation on single-family homes with conforming loan amounts and does not include cash buyers or jumbo loans. The report showed prices higher by 0.3% in November and up 6.6% from a year ago. This is now the tenth month in a row the index has hit record highs. Through November the FHFA index is up 7% for 2023.

On the rental side, which has a big impact on inflation, the Apartment List Rental Report showed new rents fell 0.3% in January and are down 1% year over year. This is the 6th month in a row that new rents have moved lower, which could mean lower inflation in future CPI and PCE reports as the lag in reporting catches up to reflect current data. As an example of the disconnect between current rental data and the inflation data, December’s CPI report showed rental costs rising 0.5%. Part of the discrepancy is renewal rents, which CoreLogic shows up 2.7% over the past year, but the majority is due to the lag in reporting.  A couple of years ago, we saw the opposite of this when rents started skyrocketing long before both the CPI and PCE reports showed significant shelter cost inflation.

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Pending Home Sales rose 8.3% in December, which was better than the 1.5% the markets expected. The drop in mortgage rates clearly had a big impact on buyer demand and could be a sign of things to come if rates decline throughout 2024, as expected. New Home Sales measuring contracts on new homes for sale rose 8% in December, also showing the impact of rates dropping. The supply of new homes for sale continues to fall below demand at a 1.46-month supply. This is a slight increase from previous months but still well below the level needed to make a dent in inventory.

According to MBS Highway, the top five appreciation reports in the US have shown appreciation has been on the rise since January. Case Shiller, FHFA, CoreLogic, Black Knight, and Zillow all show how values continue to set record highs, easily surpassing the peak of last year and fully recovering from the brief downturn from the second half of 2022. Across the board, appreciation will come in between 6-8% depending on the index, far outpacing most housing expert predictions coming into 2023.

Existing Home Sales fell 1% in December to a 3.78M unit annualized pace, which was weaker than expected. Year-over-year sales are down 6.2%. We continue to see home sales being held back by a lack of inventory. There is currently a 3.2-month supply of homes for sale well below a “normal level” of 4.6 months. Inventory will continue to pressure sales, with current levels roughly half of what we experienced in 2019.

The current data does little to assuage concerns about the limited inventory in the housing market. Existing home values are anticipated to appreciate as demand consistently exceeds supply, particularly for entry-level homes. This trend underscores the necessity for a balanced and sustainable approach to address the persistent supply-demand imbalance in the residential real estate market.

Looking at five of the major home price indexes, we see that the pace of appreciation in 2023 more than offset the downturn in 2022. Looking at 2024, most economists expect home appreciation to continue at a pace of approximately 5%.

Local Housing Data

Local housing prices appear to have stabilized and, in some cases, are showing signs of moving higher, albeit at a more moderate pace than we’ve seen over the past several years. Inventory remains tight, and we continue to see more buyers than sellers. Markets and trends can vary depending on where you’re looking, so we provide some key indicators below broken down by county so you can see what your market is currently doing.

King County – Washington

Median Home Price

$906,500

Price Per Square Foot

$584

Forecasted Appreciation

+5.76%

1-Year

+27.55%

5-Years

  • 5-year Gain based on the Median Home Price
$249,744
  • Annual Household Formations
40,480
  • 1st Time Home Purchases to be taken from inventory
24,340
  • Actual Homes Being Built
13,499 *
* Which means almost 10,000 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
228,500
King County ranks in the top 10% for forecasted appreciation over the next 5 years.

Snohomish County – Washington

Median Home Price

$715,289

Price Per Square Foot

$436

Forecasted Appreciation

+5.69%

1-Year

+27.17%

5-Years

  • 5-year Gain based on the Median Home Price
$194,376
  • Annual Household Formations
12,120
  • 1st Time Home Purchases to be taken from inventory
8,286
  • Actual Homes Being Built
4,191 *
* Which means over 4,000 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
67,200
Snohomish County ranks in the top 10% for forecasted appreciation over the next 5 years.

Pierce County – Washington

Median Home Price

$527,396

Price Per Square Foot

$333

Forecasted Appreciation

+5.35%

1-Year

+24.11%

5-Years

  • 5-year Gain based on the Median Home Price
$136,465
  • Annual Household Formations
13,930
  • 1st Time Home Purchases to be taken from inventory
9,038
  • Actual Homes Being Built
4,681 *
* Which means over 4,000 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
82,800
Pierce County ranks in the top 10% for forecasted appreciation over the next 5 years.

Spokane County – Washington

Median Home Price

$415,375

Price Per Square Foot

$356

Forecasted Appreciation

+3.94%

1-Year

+20.10%

5-Years

  • 5-year Gain based on the Median Home Price
$89,625
  • Annual Household Formations
7,674
  • 1st Time Home Purchases to be taken from inventory
4,841
  • Actual Homes Being Built
2,936 *
* Which means almost 2,000 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
51,300
Spokane County ranks in the top 10% for forecasted appreciation over the next 1 year.

Multnomah County – Oregon

Median Home Price

$525,538

Price Per Square Foot

$442

Forecasted Appreciation

+5.83%

1-Year

+29.03%

5-Years

  • 5-year Gain based on the Median Home Price
$166,333
  • Annual Household Formations
14,790
  • 1st Time Home Purchases to be taken from inventory
8,691
  • Actual Homes Being Built
2,555 *
* Which means over 6,000 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
84,340
Multnomah County ranks in the top 10% for forecasted appreciation over the next 1 year and 5 years.

Ada County – Idaho

Median Home Price

$517,307

Price Per Square Foot

$295

Forecasted Appreciation

+5.63%

1-Year

+25.38%

5-Years

  • 5-year Gain based on the Median Home Price
$127,263
  • Annual Household Formations
6,530
  • 1st Time Home Purchases to be taken from inventory
4,476
  • Actual Homes Being Built
5,967 *
* Which means there is a surplus of over 1,000 more homes being built annually vs. demand
  • Renters who can afford to purchase
41,000

Denver County – Colorado

Median Home Price

$645,597

Price Per Square Foot

$598

Forecasted Appreciation

+6.64%

1-Year

+28.60%

5-Years

  • 5-year Gain based on the Median Home Price
$186,742
  • Annual Household Formations
16,420
  • 1st Time Home Purchases to be taken from inventory
8,693
  • Actual Homes Being Built
6,89 *
* Which means over 1,500 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
85,200

San Diego County – California

Median Home Price

$936,250

Price Per Square Foot

$659

Forecasted Appreciation

+7.50%

1-Year

+37.50%

5-Years

  • 5-year Gain based on the Median Home Price
$351,094
  • Annual Household Formations
16,420
  • 1st Time Home Purchases to be taken from inventory
8,693
  • Actual Homes Being Built
6,89 *
* Which means over 1,500 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
93,153

Los Angeles County – California

Median Home Price

$893,650

Price Per Square Foot

$634

Forecasted Appreciation

+8.00%

1-Year

+40.00%

5-Years

  • 5-year Gain based on the Median Home Price
$357,460
  • Annual Household Formations
16,420
  • 1st Time Home Purchases to be taken from inventory
8,693
  • Actual Homes Being Built
6,89 *
* Which means over 1,500 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
81,133

Bay Area – California

Median Home Price

$1,650,000

Price Per Square Foot

$984

Forecasted Appreciation

+5.70%

1-Year

+28.50%

5-Years

  • 5-year Gain based on the Median Home Price
$470,250
  • Annual Household Formations
10,000
  • 1st Time Home Purchases to be taken from inventory
7,500
  • Actual Homes Being Built
4,681 *
* Which means over 4,000 more homes need to be built annually to keep up with demand
  • Renters who can afford to purchase
136,713

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