Resilient Economy Meets Housing Challenges: How High Mortgage Rates and Inflation are Shaping the Market in 2024

The housing and mortgage markets, continue to face significant challenges. As of September, average mortgage rates remain high at 5.47% for 15-year loans and 6.35% for 30-year loans. Although these rates have decreased from over 7.00% in late 2023, they still pose affordability issues for prospective homebuyers. This high-rate environment, combined with ongoing inflationary pressures, has resulted in a cooling housing market. New and existing home sales in June were the lowest since July 2011, with total sales down 5.4% year-over-year. Inventory has increased to 1.32 million units but remains below the pre-pandemic average of 1.8 million units.

In Q2 2024, the slight decline in the homeownership rate to 65.6% highlights the ongoing challenges of affordability driven by high mortgage rates. The increase in overall housing units, with a notable rise in renter-occupied properties compared to owner-occupied units, underscores a shift towards renting as a more feasible option for many. While homeowner vacancy rates have ticked up slightly, reflecting a more cautious buying environment, the stability in renter vacancy rates suggests ongoing demand in the rental market despite rising costs.

While the economy shows growth and wage improvements, the housing market remains under pressure from high mortgage rates and inflation, impacting homeownership and sales activity. The ongoing interplay between economic growth, wage dynamics, and housing affordability will be critical in determining future market conditions.