The United States Residential Property Market Analysis 2024

Record-high home prices fueled by persistent undersupply and exacerbated by elevated interest rates put a strain on buyer activity across the country and make housing affordability one of the most pressing issues for the US public and policymakers.

This extended overview from the Global Property Guide covers key aspects of the US housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents:

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

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The S&P CoreLogic Case-Shiller Index, the leading measure of US home prices, reported a 4.25% year-on-year increase in seasonally adjusted terms (or 1.91% when adjusted for inflation) in August 2024. This marks the 15th consecutive month of a record-high index level and the 8th consecutive month of slowing price growth.

"Home price growth is beginning to show signs of strain, recording the slowest annual gain since mortgage rates peaked in 2023," commented Brian D. Luke, CFA, Head of Commodities, Real & Digital Assets at S&P DJI. "<…> Prices continue to decelerate for the past six months, pushing appreciation rates below their long-run average of 4.8%." Further cooling is expected as the latest CoreLogic Home Price Index forecast sees home price gains slow to 2.3% by August 2025, muted by weakening consumer confidence over the job market and uncertainty around the results of the November elections despite decreases in mortgage rates.

United States house price annual change

The 10-city and 20-city composite indices also posted their 15th straight month of annual increases in August, up by 5.98% and 5.20%, respectively. Nevertheless, the increases seen in both composite indices also slowed from the March peak of 8.3% and 7.5%, respectively.

As of August 2024, New York, Las Vegas, and Chicago led the 20-city index, with respective annual gains of 8.1%, 7.3%, and 7.2%. Twelve metros saw annual price gains higher than the national 4.25% increase. Denver and Portland, OR remained the slowest-appreciating markets in the 20-city index.

"The Northeast remains the best-performing region, with the strongest gains for over a year," Brian D. Luke of S&P DJI added. "Comparing average gains of traditional red and blue states highlights a slight advantage for home price markets of blue states. With stronger gains in the Northeast and West than the South, blue states have outperformed red states dating back to July 2023."

S&P CoreLogic Case-Shiller Home Price Indices in 20 metro areas:

As of September 2024, the median price of new homes sold remained stable, with a slight year-on-year increase of 0.05% to USD 426,300, according to the US Census Bureau. Meanwhile, the National Association of Realtors (NAR) reported a 3.00% year-on-year increase in the median price of existing homes, reaching USD 404,500. For 2024, the NAR forecasts annual growth in the median price of existing homes at 3.62%, while the median price for new homes is projected to decline by 0.86%.

"New home sector will be increasingly in competition with existing homes, as more homeowners are listing their home for sale," Bright MLS chief economist Lisa Sturtevant commented. "Homebuilders may be forced to bring their prices down to attract buyers. New home prices are running about 5% higher than prices of existing homes in September. By contrast, in 2021, 2022, and parts of 2023, new homes were selling for between 20% and 30% more than existing homes."

Note: 2024 data is as of September 2024.
Data Sources: National Association of Homebuilders (NAHB) based on the compilation of data from the US Census Bureau and the NAR.

On the regional level, in September 2024, all four US regions registered price year-over-year increases in the median sales price of existing homes. The Northeast led with the highest annual growth at 6.0%, followed by the Midwest at 5.0%. The South saw a modest rise of 0.8%, while the West, the most expensive region, recorded a 1.7% increase.

The median sales price of existing homes by region, September 2024:

Historic Perspective:

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From Speculative Boom to Affordability Crisis

The US housing market has experienced significant shifts over the past two decades, characterized by a major boom, a severe downturn, and a complex recovery. The market peaked in 2006, driven by speculative buying, easy credit, and robust economic conditions. However, the subprime mortgage crisis triggered a collapse in 2008, leading to a sharp decline in home values, widespread foreclosures, and a deep recession. Housing starts and completions fell to historic lows, reflecting a surplus of unsold homes and reduced demand as unemployment spiked and access to credit tightened. By 2012, home values were down significantly, with the 10-city and 20-city S&P CoreLogic Case-Shiller composite indices showing over 35% drops compared to the peak of 2006.

The market began a gradual recovery after, supported by low interest rates, an improving economy, and demographic factors like the entry of millennials into the housing market. As the labor market stabilized, housing demand increased, and new construction gradually rose, with annual housing starts surpassing one million by 2014. The COVID-19 pandemic in 2020 unexpectedly intensified housing demand, as remote work fueled interest in larger suburban homes. By 2021, housing authorizations reached the highest levels since the early 2000s.

This pandemic-driven boom, however, was followed by a rapid cooling as the Federal Reserve raised interest rates in 2022 to control inflation. Higher mortgage rates reduced affordability, limiting demand and causing housing starts to fall back. Rising home prices have made homeownership increasingly challenging, especially for younger and lower-income buyers. Many have turned to renting, putting upward pressure on rental markets. Affordability has become a pressing issue, with policymakers facing demands to address the challenges through zoning reform, incentives for affordable housing, and support for first-time buyers.

The S&P CoreLogic Case-Shiller Index:

Data Source: US Census Bureau.

Demand Highlights:

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Lock-in Effects and Affordability Challenges Limit Existing Home Sales; New Homes Reflect Adaptive Resilience

Although mortgage rates have retreated somewhat in recent months, home purchase activity remains subdued. Existing home sales, which make up the bulk of total homebuying activity, remain near cyclical lows. In September 2024, sales of existing homes fell 3.5% year-on-year to a seasonally adjusted annual rate (SAAR) of 3.84 million, marking the slowest pace since 2010, as reported by the NAR.

Persisting "lock-in effects" and affordability constraints continue to deter many prospective buyers. "The lock-in effect remains strong as the bulk of existing mortgage borrowers still have notes with rates well below current market rates. This is likely continuing to keep many would-be homebuyers and home-sellers on the sidelines," Fannie Mae noted in their September Economic Development forecast.

In contrast, the new home market has shown greater resilience, with homebuilders capitalizing on low inventory and focusing on smaller, more affordable homes, as well as offering incentives like mortgage rate buydowns to attract buyers despite rising interest rates. As of September 2024, the US Census Bureau reports newly built, single-family home sales increasing 6.3% year-on-year to the SAAR of 738,000 units, the highest level since May 2023.

"The timing of the long-expected pick-up in home sales activity, as well as a further moderation in home price appreciation, will depend in part on the willingness of current homeowners to relinquish their low mortgage rates by offering their homes for sale. Of course, continued strong homebuilding activity will also play a significant role as the shortage of national housing stock remains the primary impediment to affordability," said Mark Palim, Fannie Mae Senior Vice President and Chief Economist. "The anticipated unfreezing of the existing home sales market and an increase in the supply of new homes are expected to alleviate market pressures," he added, indicating a potentially more balanced housing environment as we head into 2025.

Note: 2024 data is as of September 2024.
Data Sources: National Association of Homebuilders (NAHB) based on the compilation of data from the US Census Bureau and the NAR.

In terms of regional distribution, in September 2024, new home sales continued to grow the strongest in the Midwest and the South, which saw 14.9% and 14.7% growth year-over-year, respectively. Notably, 64.6% of all new home sales occurred in the South that month, reflecting its status as the most active area for new home construction in recent years. The Northeast saw a major pickup (21.7%) in new home sales in September compared to August but stayed well below the pace (-22.2%) of September 2023. The West remained flat month-over-month but still trailed by 10.9% year-over-year.

As for the existing home sales, the Northeast remained the regional underperformer due to low inventory and rapid home price appreciation negatively affecting affordability. The West, on the other hand, was the only region reporting positive year-on-year growth in this segment.

Seasonally adjusted annualized sales rate by region:

Foreign home purchases demonstrated a significant decline. From April 2023 to March 2024, foreign buyers purchased 54,300 US homes, down 36.47% year-over-year - the lowest level since the NAR began tracking in 2009. "The strong US dollar <…> makes US homes much more expensive for foreigners," the NAR chief economist Lawrence Yun said in a statement. "Therefore, it's not surprising to see a pullback in US home sales from foreign buyers. Historically low housing inventory and escalating prices remain significant factors in constraining home sales for American and international buyers alike."

In the reporting year ending March 2024, the dollar volume of foreign property purchases in the US declined by 21.2% year-over-year, reaching USD 42.0 billion. However, rising property values pushed the average purchase price up by 21.9% to USD 780,300. Resident foreign buyers, including recent immigrants and those with US residency visas, accounted for USD 22.6 billion of the existing home sales, reflecting a 3.4% decrease from the previous year and representing 54% of total foreign buyer sales. In contrast, non-resident foreign buyers based abroad comprised 46% of the total sales volume, purchasing USD 9.4 billion in existing homes, a 35% annual decline.

Overall, foreign buyers held a reduced share of the US market, representing 1.3% of existing home sales (down from 1.8% in the previous reporting period) and 2.0% of total sales volume (previously 2.3%). Notably, 50% of foreign buyers paid in cash (compared to 28% of domestic buyers), with 45% planning to use their properties as vacation homes, rental investments, or a combination of both.

Note: Reporting years are April through March, as specified by the NAR.
Data Source: NAR.

Canada reclaimed the top spot among foreign buyers with a 13% share, followed by China (11%), Mexico (11%), India (10%), and Colombia (4%). Other key origin countries for foreign demand included Brazil, UK, Germany, Cuba, and Israel.

Florida remained the top destination for foreign buyers, attracting 20% of international purchases. Texas rose to second with a 13% share, followed by California (11%), Arizona (5%), and Georgia (4%). Additional popular markets included New Jersey, New York, North Carolina, Illinois, and Michigan.

Supply Highlights:

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Persistent Undersupply Exacerbates Affordability Issue, New Starts in Decline

As of mid-year 2023, the US Census Bureau estimated nationwide housing stock at 145.3 million units, of which about 39% were concentrated in the South, 22% in the West, 21% in the Midwest, and 17% in the Northeast. Individual states with the largest housing stock exceeding 10 million units were California, Texas, and Florida. The most notable relative change in housing stock from 2022 to 2023 was estimated in Utah, Idaho, South Dakota, and Texas (over 2% year-on-year).

According to the 2023 American Community Survey estimates, 67.4% of the total housing stock was represented by single-unit properties, 27% by units in multi-family properties, and the remaining 5.6% were units in mobile homes, vans, RVs, boats, etc.

New private housing completions have been growing annually in the last decade, however, the rate of this expansion slowed down since the pandemic, from 8.7%, on average, in 2014-2019 to 3.7%, on average, in 2020-2023, based on the figures published by the US Census Bureau.

In the first nine months of 2024, 1.2 million units were completed across the United States, which is 13.7% above the comparable period last year, with the seasonally adjusted annual rate of 1,680,000 reported for September 2024. More than half (55.6%) of all completions reported in 2024 to date were located in the South, followed by the West (23%), the Midwest (13.8), and the Northeast (7.7%). The share of single-family units in total deliveries, while still dominant, dropped from 73.5% in 2022 to 68.9% in 2023, and 62.4% in the first nine months of 2024, signaling more multifamily properties coming into the market.

Data Source: US Census Bureau.

Despite this consistent growth in new deliveries, the US housing market remains significantly undersupplied, especially in the affordable segment. The chronic undersupply results in rising prices and massive pressure on affordability across the country, according to industry experts.

The Emerging Trends in Real Estate 2025 report from PwC cites John Burns's Research and Consulting, which estimates the gap between total housing demand in the country (including single-family, multifamily, and manufactured housing) and existing supply at 1.8 million units. "Combining this undersupply with other housing needs (due to demographic demand, second-home demand, and replacement housing) means the United States will have to construct 18 million housing units over the 10-year period from 2024 to 2033 to bring demand and supply back into balance," says PwC.

At the same time, the forward-looking indicators of new building permits and housing starts have been in decline since 2021. According to the US Census Bureau data, in the first nine months of 2024, 1.1 million units were authorized across the United States, a 3.3% decline from the comparable period last year, with the seasonally adjusted annual rate of 1,428,000 reported for September 2024.

During the same period, just over 1 million units were started (a 3.4% decline compared to the previous year), with the seasonally adjusted annual rate of 1,354,000 in September 2024. In parallel, the number of units authorized but not started at end-period has been gradually climbing up, most recently reaching 278.3 thousand in September 2024.

Data Source: US Census Bureau.

About 68% of all private housing units authorized and nearly 75% of all units started in January-September 2024 were in single-unit properties. "A wave of apartment deliveries that began several years ago- concentrated in the Sunbelt-is winding down," says PwC.

Underpinning the overall downward trajectory in new development is the homebuilder sentiment in the dominant single-family sector. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) designed to track the pulse of the single-family residential developers in the US, stood at 43 in October 2024, up two points from the previous month, but still below 50, indicating the majority of builders reported low confidence in market conditions, including current and expected sales, as well as prospective customer traffic.

In general, housing accessibility and affordability remain among key concerns for US consumers, to the point of becoming what Bloomberg called "housing's worst crisis in decades" and becoming an issue in the 2024 elections. Both presidential candidates released a number of positions and proposals (mainly aiming to increase the supply, moderate the demand, or provide financial assistance to qualifying households), which are being actively discussed in the media. "Housing policy experts know that the United States needs more supply at price points affordable to low- and moderate-income households. The question is whether that can be achieved given the cost and political dynamics on the local, state, and federal levels," concludes the PwC Emerging Trends in Real Estate report.

Rental Market:

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Low Vacancy Rates and Stabilization of Rental Growth

According to the research carried out by the Global Property Guide in Q3 2024, gross rental yields for residential units in the US averaged 6.10%, 0.17 percentage points up from 5.93% previously reported in Q1 2023. Regional performance varied, with the highest yields among the assessed submarkets seen in Chicago (9.11%), followed by Atlanta (7.57%) and Miami (7.31%). San Francisco, Seattle, Los Angeles, and Boston showed the lowest yields of below 5% each.

No significant shifts in the rental yields dynamic are likely in the near future, as the two nationwide indices serving as leading indicators of rental inflation in the US demonstrate stabilization of rent growth in the last twelve months, after a period of accelerated growth observed in 2021-2022. The monthly Zillow Rent Index, compiled by the popular real estate platform, showed a 3.3% year-on-year increase in September 2024, compared to 10.3% in September 2022 and 13% in September 2021. In a similar pattern, the quarterly New Tenant Rent Index published by the US Bureau of Labor Statistics and measuring prices tenants would face if they changed housing units every period showed a 1% year-on-year increase in Q3 2024, compared to 3.1% and 9.9% during the same period in 2023 and 2022, respectively.

According to the September 2024 figures from Zillow, among the 20 largest metro areas the most pronounced annual growth was observed in Detroit (5.4%), followed by Washington, DC (4.8%), and Chicago (4.8%). At the same time, the annual rental growth for Denver, San Diego, Tampa, Atlanta, Phoenix, and Dallas was under 2%. The rent growth was generally stronger for single-family homes (4.3%) than for multifamily residences (2.5%).

"As we head into cooler months, rents will likely drop on a monthly basis in more metros - and as more newly built apartments open up in markets across the country, annual rent growth will continue to moderate. The recent surge in multifamily construction has brought more homes online, which has eased competitive pressure among renters and helped to slow rent growth dramatically. Additionally, lower mortgage rates may likely pull more renters into the sales market, further easing competition. However, with multifamily construction now falling once again, whether this modest reprieve for renters will hold into next year is yet to be told," said the latest market report from Zillow.

Data Sources: Bureau of Labor Statistics, Zillow.

In Q3 2024, the nationwide median asking rent for vacant units was reported by the US Census Bureau at USD 1,523 a month, up 4.2% year-on-year compared to a much stronger growth of 9.6% and 10.9% observed during the same period in 2023 and 2022, respectively.

The dynamic varied regionally, with the highest median asking rent level and the most pronounced year-on-year increase reported in the West region.m

Median asking rent, by region:

With home sales prices generally outpacing rents, vacancy levels for rental properties remain low, indicating consistent tenant demand. As of Q3 2024, the US Census Bureau reported a 6.9% vacancy rate for rental units across the country, only marginally up from 6.6% a year ago but notably below the levels observed a decade and two decades ago. Regionally, the lowest vacancy was observed in the Northeast, at 5.4%, while vacancy in the South stood significantly above the national average at 8.5%.

Data Source: US Census Bureau.

At the same time, the homeownership rate in Q3 2024 is marginally down from the previous year at 65.5% (with the remaining 34.4% of housing units being tenant-occupied), according to the US Census Bureau data. In terms of homeownership, the Northeast (62.2%) and the West (61.0%) stood below the national average, indicating a larger proportion of renters in those regions, while the Midwest (70.1%) and the South (67.2%) had a slightly higher share of owners.

Despite the general stability of the homeownership rate in the last several years and positive shifts expected in the market with the lowering of interest rates, the overall increase in the relative price of shelter may well be a lasting feature of the post-pandemic economy in the US, according to the International Monetary Fund (IMF) assessment. "If that proves to be true, in the coming years we should expect to see a decline in rates of home ownership (and increase in rentals), slower rates of household formation, and a shift of demand toward smaller homes. Younger and lower-income households would be most affected by these trends," said the latest IMF staff report.

Mortgage Market:

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Interest Rates Elevated, New Loan Originations at Large Banks Historically Low

At the end of September 2024, based on inflation gradually progressing towards target levels, as well as the overall assessment of the economic activity in the country, the US Federal Reserve lowered its federal funds target range (FFTR) by 0.5 points to 4.75-5.00%. This was the first cut announced by the Federal Open Markets Committee (FOMC) after a series of consecutive hikes throughout 2022 and 2023. "Recent indicators suggest that economic activity has continued to expand at a solid pace. <…> The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC commented on the monetary policy decision.

FTTR lowering led to a corresponding drop in the bank prime loan rate from 8.50% to 8.00%. However, the shift is yet to be reflected in average interest rates on mortgages tracked by Freddie Mac. According to their weekly release, as of October 17, 2024, the average interest stood at 5.63% for 15-year fixed-rate mortgages and 6.44% for 30-year fixed-rate mortgages, both indicators increasing for the third consecutive week but below last year's levels. "In general, higher rates reflect the strength in the economy that is supportive of the housing market. But notably, as compared to a year ago, rates are more than one percentage point lower, and potential homebuyers can stand to benefit, especially by shopping around for the best quote as rates can vary widely between mortgage lenders," said Freddie Mac.

Interest rates on mortgages:

Data Sources: FRED, Freddie Mac.

Elevated interest rates led to a sharp decline in new mortgage loan originations from pre-2022 levels. According to the data from the Federal Reserve Bank of Philadelphia, in Q2 2024, large banks reported only around 108,000 new mortgage accounts with a corresponding loan value of USD 59.6 billion, compared to about 116,000 accounts (USD 61.7 billion) during the same period last year, and over 513,000 accounts (USD 214.5 billion) in 2021

"Mortgage originations in the second quarter of 2024 fell 3.3 percent on a year-over-year basis and remain historically low. Mortgage portfolio credit quality is strong, with a median current credit score of 791 for large bank mortgage customers," said the quarterly insights report from the Federal Reserve Bank of Philadelphia.

Data Source: Federal Reserve Bank of Philadelphia.

At the same time, the majority of existing mortgages were insulated from the impact of higher interest rates in the last two years, according to the IMF assessment in their latest staff report: "During the pandemic, both corporate and household borrowers locked in low rates at long maturities, paying down higher cost, floating rate debt. Around one-half of mortgages reset at lower rates during 2020-21 (either through refinancing operations or when the mortgage is refreshed through home sales). As a result, by end-2021, over 95 percent of mortgages were at low, fixed rates."

The total value of outstanding mortgage debt increased by 3.1% year-on-year in 2023, a more moderate growth compared to 6.7% in 2022 and 9.1% in 2021. The expansion was more pronounced in the multifamily residential (5.0%) and farm (6.0%) segments, while mortgages on one-to-four-family residential grew by 2.8% and mortgages on commercial properties grew by 3.0%. Federal Reserve data published by FRED shows that in Q2 2024, total mortgage stock stood at USD 20.3 trillion, with one-to-four-family residential making up 69.3% of that amount, followed by commercial properties (18.1%), multifamily residential (10.8%), and farms (1.8%).

Data Sources: FRED, IMF.

Sized against the US economy, the mortgage market was equivalent to about 77.4% of GDP in 2023, down from 85.6% two years prior and significantly below the 2007 peak of 105.9% of GDP in current prices.

Overall, the 2023 American Community Survey estimates from the US Census Bureau show about 60% of owner-occupied housing units in the country have a mortgage on the property (down from an estimated 64% a decade ago). Of those, about 6% have multiple mortgages (down from an estimated 11% a decade ago).

Socio-Economic Context:

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Economy Largely Returned to Balance, Uncertainties Tied to Election Results

The US economy has turned in a strong performance over the past few years, as hysteresis effects from the pandemic did not materialize, and is now the only G20 economy that is operating above the levels of output and employment expected before the pandemic, according to the recent IMF assessment. "Q4/Q4 growth in 2023 (at 3.1 percent) was almost three times that expected <…> and core PCE inflation was almost 1 percentage point lower," said the IMF staff report.

On a year-on-year basis, the country's real GDP growth in 2023 reached 2.9%, following 2.8% in 2022 and 6.5% in 2021. The growth momentum, however, is projected by the IMF to moderate to 2.8% in 2024 and 2.2% in 2025. Delotte's baseline scenario sees the indicator hover between 1.7% and 2.1% per year between 2026 and 2008.

Partly as a result of the Federal Reserve's monetary tightening, Consumer Price Index (CPI) inflation in the US eased from an 8% peak in 2022 to 4.1% in 2023 and was most recently reported by the US Bureau of Labor Statistics at 2.4% in September 2024. The IMF expects the indicator to return to the FOMC's target of 2% by mid-2025. The corresponding further cuts in the federal funds rate are anticipated in December 2024 and throughout 2025.

Data Source: IMF.

In the US labor market developments, the latest IMF staff report notes the strong job growth, increased real incomes, and uneven wealth gain distribution: "Real incomes were diminished by the unexpected rise in inflation in 2022 but have now risen above pre-pandemic levels. Job growth has been particularly fast with 16 million new jobs created since end-2020. However, income and wealth gains have been uneven across the income distribution and poverty remains high, particularly following the expiration of pandemic-era support."

The nationwide unemployment rate in the US has dropped significantly since the pandemic and was most recently reported by the US Bureau of Labor Statistics at 4.1% in September 2024, up from 3.8% a year ago and 3.5% two years ago. This recent uptick, however, is largely attributed to the expansion of the labor force (in part through immigration), and not to a decline in employment. "The recent loosening of the labor market indicates a normalization, as opposed to a U.S. economy that's about to slip into recession. An expansion of the labor force, rather than a fall in employment, has spurred the rise in the unemployment rate up to a key difference from previous cycles at the start of a recession," commented S&P Global Ratings in their Q4 2024 economic outlook.