What Is the 2024 Economic Outlook for the Property Industry?  

A Conversation With Selma Hepp

What is the future of the U.S. economy? Host Maiclaire Bolton Smith and CoreLogic Chief Economist Selma Hepp dive into this perennial question in the final episode of Core Conversations: Season 3.

From incremental home sales increases to gradually declining mortgage rates, there is a lot that we can expect to happen in 2024. However, geopolitical risks, such as oil prices and inflation, have the potential to impact the trajectory of mortgage rates and change the development of the overall housing market.

Tune into this final episode of the season to gain insights into the uncertain future of the housing market, as well as what current trends and property data indicate is likely to develop as we pass into the new year.

In This Episode:

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2023 Economic Look Back: A Tale of Two Housing Markets

Selma Hepp:

I am a little bit concerned about winter home prices this year and coming until next spring because of mortgage rates being so high.

Erika Stanley:

Welcome back to part two of our conversation about the U.S. housing market in the economy in 2023. In this episode, our host, Maiclaire, will continue talking to CoreLogic Chief Economist Selma Hepp about what we can possibly look forward to in 2024. If you missed part one, I do recommend going back and catching up on last week’s episode where we talked about what happened in the housing market and the U.S. economy over the course of the year.

Maiclaire Bolton Smith:

Okay, so we’re seeing lots of baby boomers buying new houses. We’re seeing lock-in effects still being an issue. We’re seeing if you’re buying a house, it’s going to be 60% higher than it would’ve — you pay 60% more than you would’ve before. We’re seeing rentals stabilize a little bit, but some areas have had massive increases. Miami being one of them, 50%, which I can’t, it makes my brain explode. New construction is at an all-time high that we haven’t seen in a while. So, now the year is coming to a close. What do we think is going to happen? What does the future look like as we go into 2024 for the housing market? I think what we thought was going to happen at the beginning of this year didn’t really happen. Where do you think we’re going to go?

SH:

Yeah, so probably I’m going to be wrong on everything that I say because who knows how 2024 is going to unfold. But so far the way things are looking, because basically we always just base our expectations on what’s currently, what’s the layout of the land. And so, mortgages are at a 23-year high, so they’re really constraining sales and inventory like demand and supply, right? So, as a result of that, I think we are still expecting to be really low in terms of home transactions, in terms of home sales, at least on the existing side. Our forecast has a slight increase, like 4% increase, in home sales. But again, that’s not all necessarily from, this is for total home sales. This is not just existing. This may be partially substituted by new home sales, right? So in essence, flat home sales activity. We do think that mortgage rates eventually by some point next year, middle of next year, will start gradually declining, and that will help bring more buyers in and also release some of that lock-in effect that we have.

And so, years after 2024, we definitely do see housing market improving in a sense that it will keep growing, a number of home transactions will keep increasing. Now, high mortgage rates at the moment, what they’re doing is they’re really challenging home price growth. So, what was interesting this year with home prices is that we left the year 2022 with home prices declining, and that decline bottomed out at the beginning of this year. And as buyers rushed in earlier this year, during the spring home buying season, there were more buyers than there were sellers. And so, that put pressure on home prices. And in fact, home prices have grown some 5% just in a few months from the bottom in February until August of this year, they’ve gone up.

So, as a result of that, when we look on a year-over-year basis, and that’s something that gets most frequently reported in media, what’s a year-over-year change in home prices? We are likely to continue to see increases in home prices basically because of the base effect. Because what are we comparing it to? We are comparing to that low at the end of 2022, and we’ve had 5% growth so far. So anyways, but I do think that I’m a little bit concerned about winter home prices this year and coming in until next spring because of mortgage rates being so high. So, we may see on a monthly basis some declines in home prices, right? We may see decline or just leveling off like steady plateauing of home prices because it’s for those sellers that are out there right now, they’re likely out there because they need to sell and they may discount, right? They may discount to meet the buyer demand.

And so, that would lead to some of that slight decline. Although again, on a year-over-year basis, I think we’ll likely to see about 4% price appreciation this year overall for the year and 4% next year. So, that’s what we have in our forecast. So, unless something crazy happens, and there was a lot of crazy this year, right? And it’s even now, and so when you look at geopolitical risks, you look at oil prices — because oil prices, what the concern is that oil prices will put pressure on agricultural products or food as well, and you will see a re-acceleration of inflation. What does that mean? Means Fed stays higher for longer, means mortgage rates higher for longer, right? So, that’s the wild card or something to keep an eye out for.

ES:

Before we end this episode in the 2023 season, let’s take a break and talk about what’s happening in the world of natural disasters. CoreLogic’s Hazard HQ Command Central reports on natural catastrophes and extreme weather events across the world. A link to their coverage is in the show notes.

In late October, the Pacific saw a historic storm make landfall in the greater Acapulco area in Mexico. CoreLogic estimated insurable losses from wind damages were between $10 and $15 billion. However, financial impacts incurred by private insurance markets are likely to be lower than the total insurable modeled loss. Hurricane Otis is still notable for its sudden development that surprised meteorologists. The storm increased to a category 5 hurricane within 24 hours, becoming the strongest tropical cyclone on record to affect the Mexican state of Guerrero. Then, another record storm broke out this time, though it was on the other side of the pond.

Storm Ciarán, also known as Emir, which was classified as a weather bomb as it approached to Europe, set new meteorological records. The storm raced along the English Channel traveling through northwestern France and southern England into the Low Countries. Although, an intense storm with severe winds and heavy rainfall, CoreLogic said it does not expect insured losses across the region to be material.

Hurricanes don’t exist in isolation. New research from CoreLogic has found that ZIP codes that have had at least one 104-degree Fahrenheit day since 2000 are more impacted by severe convective storms and cyclones. Inland flooding risk also jumps in these areas. Since extreme heat partially drives these storms, it is notable that the 10 warmest years on record have all occurred since 2010. To learn more, a link to the white paper is in the show notes.

Before we finish our episode though, we wanted our listeners to know about an upcoming event in January where they can meet some of our experts, including Maiclaire, in person.

Garret Gray:

I’m Garret Gray and I’m standing here at the Fairmont in Austin, and I can’t wait to see you at INTRCONNECT 2024. INTRCONNECT is where the insurance restoration industry comes together to solve tomorrow’s problems today. So come on down to Austin, make sure you have a seat at the table because we need your voice. There’s not one group or company that can tackle these problems alone. It’s all of us coming together to focus on the lives beyond the buildings. Register today, and I’ll see you in Austin.

MBS:

Selma, you are not a fortune teller. You are an economist, so we do appreciate that view and thank you for doing this recap with us today. This has been great. To kind of recap kind of where we came throughout the year, this year went by incredibly fast. I think many people will agree with that, and just to see kind of how things evolved. So, I’m not a fortune teller, but if I had to predict one thing, it’s that you’re going to be back soon again on this podcast in season four. So, thank you so much, Selma for joining us today on Core Conversations, a CoreLogic Podcast.

SH:

Thank you. Thank you Maiclaire, so much for having me. It was such a pleasure talking to you, and I look forward to our next meeting again on this podcast.

MBS:

Sounds great, and thank you for listening. I hope you’ve enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released. And thanks to the team for helping bring this podcast to life. Producer, Jessi Devenyns; editor and sound engineer, Romie Aromin; our Facts Guru Erika Stanley; and social media duo Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.

ES:

You still there? Well, thanks for sticking around. Are you curious to know a little bit more about our guest today? Well, Selma Hepp is CoreLogic’s Chief Economist. Selma leads the economics team, which is responsible for analyzing, interpreting, and forecasting housing and economic trends in real estate, mortgage, and insurance. Selma frequently appears on local and national radio and television programs and has been widely quoted in The Wall Street Journal, The New York Times, and many industry trade publications. She also regularly contributes to the CoreLogic Intelligence blog where you can read her work at CoreLogic.com/intelligence.

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