Navigating the Housing Market in 2024: Our Take on the Year Ahead for Homebuilding
There has been no shortage of news in the housing market over the last year – interest rates, inflation, increasing population and evolving homebuyer needs made for another busy year for homebuilders and developers. As 2024 begins, the housing and real estate landscape continues to undergo transformations, offering both challenges and opportunities for builders, developers, and investors.
In North America several factors are expected to influence the market, including economic recovery, high immigration, affordability, and supply. Here’s our snapshot of key data that can help you navigate the year ahead.
Note: Most recent data may have changed once you’ve read this! Be sure to check sources for the latest information or reach out with any questions.
For the Canadian market, the real estate sector is facing a challenging environment due to high interest rates, a decline in consumer confidence, and supply constraints; however, there are also various positive economic indicators forecasted for the year ahead.
- The Bank of Canada projects inflation to hover around 3.5% until mid-2024, before trickling down to its 2% target in late 2025. A positive indication that consumers may begin to feel less strain on their budgets in the year ahead.
- The Fixed-Five Year Mortgage rate is expected to decline in 2024, reaching 5.90%. The drop is anticipated to bring in buyers who have been on the side-lines, and ultimately increase demand.
- On average, Canadian households owe $1.80 for every $1.00 of disposable income (Statistics Canada reported Households Debt to Income in Canada averaged $1.36 from 1990 until 2023). This number can indicate a hesitancy for consumers to make a home purchase as they are dealing with more debt than ever before.
- Stats Canada also reported that household savings for Canadians increased from 3.7% to 5.1% in the second quarter of 2023 but are still below the 7.7% average. Lower savings can affect a buyer’s ability to make a down payment, or even price them out of a home type category.
- The Conference Board of Canada reported consumer confidence at some of the lowest levels on record, with the number of Canadians who thought it was a good time to make a major purchase dropping below 20%.
- Lumber prices have come down recently in the Canadian market; however, they are expected to grow in 2024 due to increasing demand from the US. This may cause builders to evaluate product pricing, and ultimately lead to housing price increases reaching consumers.
- Population growth in Canada overall hit 2.98% in 2023. Alberta led all provinces at 4.09% with over 184,000 people added in one year.
- Interprovincial migration also played a big role in the population dynamic in the country. Net interprovincial migrants led to faster population growth in Alberta vs. other provinces, with almost seventy-five per cent coming from BC and Ontario.
In the United States, the housing market is expected to remain competitive, with strong job and population growth being met with limited land and labor to build.
- Inflation has been easing, however, the latest readings from the U.S. Bureau of Labor Statistics show a reported 0.3% increase in the December Consumer Price Index, with a reading at 3.4%. Notably, the index for shelter continued to rise in the final month of the year.
- The National Association of Realtors (NAR) predicts the 30-year fixed-rate mortgage to average 6.3% in 2024, which will likely improve housing affordability for homebuyers and attract more home buyers to the market.
The top five markets that the NAR notes to have the most pent-up housing demand for 2024:
- Austin-Round Rock-Georgetown, Texas
- Dallas-Fort Worth-Arlington, Texas
- Dayton-Kettering, Ohio
- Durham-Chapel Hill, N.C.
- Harrisburg-Carlisle, Pa.
- New-home sales increased nearly 5% in 2023, and NAR notes that they could increase another 19% by the end of 2024. In addition, existing-home sales are expected to rise by 13.5%.
- America's population grew by more than 1.75 million over 2023 (a 0.53% increase). The U.S. Census Bureau expects population to continue to grow in 2024, with international migration anticipated to add one person every 28.3 seconds to the U.S. population.
- The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) noted an increase in builder sentiment from 34 to 37 in December 2023 – still a significant way from the 50 points that translates to builders seeing good conditions ahead for new construction.
2024 is set to be another eventful year in housing. The demand for homes is expected to increase in North America, and supply will be chasing that demand to try and catch up. Even though interest and inflation rates are anticipated to drop, there may be a longer delay to seeing the benefits catch up and make an impact on consumer’s financial situations. As with all predictions, there is always risk when trying to look into the crystal ball for answers about the future, but there is overall optimism regarding market activity for the year ahead. While economic indicators do lean towards a stronger and busy housing market for 2024, external factors, including major international events, may influence shifts that are not anticipated.
What Can We Control?
Keeping a close eye on consumer sentiment, identifying changes in consumer trends, and building an effective 360 marketing strategy are all things we can be doing – no matter what’s happening in the market. The goal is to create a strong connection with homebuyers that ensures your builder brand is top-of-mind for when they are ready to make their housing choice, and providing a product that meets the current needs of buyers. Focus on what makes you different from competitors, find innovative ways to connect with your audience, and invest in building a strong brand that homebuyers are excited to make the biggest purchase of their life with.
Want to chat more? Reach out to Jordan Mair, ZGM's Director of Homebuilding Marketing, at email@example.com.