Fall 2024 Real Estate Forecast for the Southwest USA

As we move further into Fall 2024, the Real Estate market in the Southwest U.S. is showing signs of stabilizing after years of rapid price increases after the pandemic. Note: Fall kicked off on September 22nd and ends on December 21st.

Home Prices and Mortgage Rates

Home prices, which saw steep gains, are expected to either remain steady or see modest declines in some areas. This may offer somewhat of a slight improvement in affordability for buyers. Both Realtor.com and Redfin.com report that these cooling trends may benefit buyers, particularly in areas where home prices have reached unsustainable or challenging levels.

Mortgage rates are a critical factor that influence buyers’ decisions. The rates are forecasted to decrease slightly, with expectations that rates will hover around 6% for qualified borrowers by the end of the year. This shift could lighten some of the financial pressure on homebuyers, though inventory remains quite tight in many regions. These trends are likely to lead to increased market activity, with potential buyers eager to take advantage of improved affordability, which may cause a year-end buying rush.

While price stability and easing mortgage rates offer some optimism, the market may still face challenges, especially in high-demand areas where housing supply continues to lag behind buyer demand. However, for those looking to enter the market or move up to a larger home, Fall 2024 might present a better opportunity compared to previous seasons (Norada Real Estate Investments)(Money).

Demand and Market Dynamics

As we enter fall 2024, demand for housing continues to rise. This increase is primarily by first-time homebuyers, a growing population of remote workers relocating to more affordable areas, and people seeking job opportunities. According to recent studies, markets in Arizona, Nevada, and Texas are particularly benefiting from this trend, with strong migration flows continuing into these states from pricier regions such as California (National Association of Realtors, 2024).

Young professionals and millennial families remain a core group driving demand, despite challenges like elevated mortgage rates and inflation. This demographic is increasingly focused on suburban areas where they can find larger homes at more affordable prices, and the availability of remote work options has made relocation more feasible (Freddie Mac, 2024).

Builders, in response to these demand shifts, are prioritizing construction of affordable single-family homes, especially in the outer suburbs and secondary markets. Price adjustments are likely to occur as competition intensifies among sellers, with incentives such as lower down payments or rate buy-downs becoming common (Realtor.com, 2024). Additionally, generational housing is becoming more common, as families seek homes that can accommodate multiple generations under one roof, driven by both economic and caregiving needs.

Shifts in Inventory

A notable change in fall 2024 is the gradual recovery in housing inventory. While inventory levels have been historically low over the past few years, new construction projects are helping to ease the shortage, particularly in the case of mid-tier and starter homes. As more residential houses enter the market, buyers may find a greater range of options, which could help balance out some of the high prices we’ve seen recently (Zillow, 2024).

However, this influx of new listings could also put pressure on sellers, which may lead to extended sales cycles (days on market). The Southwest market is expected to maintain relatively high competition, yet sellers may need to adjust their pricing strategies to attract the growing pool of budget-conscious buyers.

Economic and Policy Influences

The economic outlook for fall 2024 remains complex, as factors like inflation, interest rates, and potential global disruptions continue to affect the Real Estate landscape. However, local governments in the Southwest are taking steps to mitigate affordability concerns, especially in rapidly growing regions like Arizona, Nevada, and Texas (Realtor.com, 2024). Many local initiatives focus on reducing regulatory barriers to speed up the development of affordable housing, particularly in suburban and secondary markets where demand remains high.

At the federal level, policy discussions around housing affordability are intensifying. The upcoming 2024 elections are expected to play a significant role in shaping future housing policies. There has been growing support for national initiatives that could subsidize down payments for first-time homebuyers, especially those from under-represented communities. Other proposed measures include promoting more inclusive zoning policies that would increase the availability of affordable housing units in high-demand areas (Redfin, 2024).

Mortgage rates, while still elevated compared to historical norms, are showing signs of stabilization. Many experts predict that rates could slowly decrease as the Federal Reserve adjusts its monetary policy, which would provide some relief to buyers who have been priced out of the market in previous years (Freddie Mac, 2024). This potential decrease in rates, combined with a modest rise in housing inventory, may help ease the affordability crisis that has gripped the Southwest Real Estate market in recent years.

Conclusion

While challenges like housing affordability and economic uncertainty remain, the Southwest Real Estate market in fall 2024 is positioned for cautious optimism. Local policy efforts, combined with potential federal interventions, could create a more balanced market environment. As mortgage rates stabilize and inventory levels increase, prospective homebuyers may find more opportunities in this evolving landscape.