According to Morgan Stanley’s chief US economist, there will be a change of fortune for the housing market next year. As a result, improving home affordability is predicted, which will thaw what has been a difficult year. Despite challenges such as rising mortgage rates, there is hope on the horizon. The economist expects home sales to be weak in the first half of next year, but to improve in the second half and further into 2025. This is due to the affordability improving, and an increased supply of homes.
Furthermore, homebuilding activity is expected to grow stronger next year. The economist stated that home prices should see modest declines as growth in inventory offsets the increase in demand. However, challenges remain, such as a slowdown in consumer spending and a cooling labor market. Additionally, GDP growth is projected to slow over the next few years. Despite these obstacles, there are positive themes playing out next year, such as improving business investment and equipment spending.
The report also predicts that interest rates will come down in 2024, which will provide further relief to the housing market. These cuts are expected to start by mid-2024, and the central bank will likely continue lowering rates, eventually bringing the real rate down to 0.4% by late 2025. These predictions offer a mixture of both good and bad news for the housing market in the coming years.
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