Factors Affecting Housing Prices in 2024: From Interest Rates to Investors' Return to Market

As time passes, the costs associated with building homes continue to rise. But what are the factors that cause its price to increase? Discover these housing price-influencing factors in 2024, including the return of real estate investors to the market and interest rates.

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Interest Rates Are Still High

A 30-year fixed-rate mortgage carries an average interest rate of 6.62%. Although there is not a significant difference from the same time last year, the rates are still substantially higher than they were when the worldwide epidemic According to Joe Salerno, co-founder, and chief investment officer at Yardsworth, there is a possibility that interest rates may decrease by a further half percent by the end of the year 2024. 

On the other hand, he anticipates they will continue to fall within the 6% range during the remainder of the year. You could reportedly be better off waiting until interest rates decrease slightly before joining the market. This is because even a half percent can significantly affect how much money it costs to finance a property.

Increased Competition Could Lead to Consistently High Prices

An increase in interest rates might stimulate a surge in purchasing activity, ultimately resulting in elevated prices. A real estate investor named Marisa Simonetti, who works for the Simonetti Real Estate Team, claimed that the most significant drawback of reduced rates in 2024 is that it is anticipated that a large number of additional purchasers will enter the market, which will result in higher competition. However, if there is a sufficient supply of homes, the housing market can reach a state of equilibrium or equilibrium.

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Zoned Out

One of the most critical factors that determines the availability of housing is zoning restrictions, which are regulations that govern how land can be used. As mentioned, it is not the lack of construction that is to blame for the scarcity of affordable housing in many locations; instead, the rules limit construction. In more than 75% of the city, constructing apartment complexes is against the law, which is one of the most well-known examples of this phenomenon.

A single-family residence, duplex, triplex, or fourplex is permitted in most of the city's zoning. Due to these stringent zoning regulations and the increased demand for housing in the city, residents must pay higher rents and housing prices. Nevertheless, the United States of America is one of many countries experiencing this issue. The effects of zoning restrictions have been much more severe for the country directly to the north, Canada. 

Decreased New Home Supply

From an all-time high of 51,000, the number of consents granted nationwide for constructing new homes has come down to 38,000. Yet, considering that the most recent numbers have decreased by more than 30% compared to the same months a year ago, we are getting closer to thirty thousand consents.

By incorporating the practice of demolishing existing houses to make way for new townhouses and considering the current trend of fewer consents progressing to completion compared to previous years, the overall increase in the nation's housing stock to approximately 2 million is negligible in comparison to the growth of the population.

Property Investors' Return to the Market

As mortgage and term deposit rates decline due to a change in tax regulations that provides an 80% interest expense deduction beginning April 1 of this year, more investors will enter the market.

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