Morgan Stanley anticipates a possible 5% drop in home prices by December 2024 if 30-year fixed mortgage rates remain at current 8% levels. Elevated rates could result in flat home prices by the end of the year, and further sustained high rates could cause prices to fall 5%, even with a 5% growth in inventory, Insider reports.
Morgan Stanley also expects the yield on the 10-year U.S. Treasury to ease by mid-2024, which may bring down mortgage rates. For now, home prices continue to rise, with a 2.8% increase in median existing U.S. home prices in September.
Rising mortgage rates sidelined a good deal of buyers and sellers from the housing market through 2022 and 2023.
That's led to a dearth of available supply, which has pushed up home prices over the past year. But a prolonged period of high rates could reverse that trend.
"Longer term, if mortgage rates were to stay close to 8%, the headwinds this would represent for demand could prove to have a more negative impact on home prices," Morgan Stanley said.
Advertisement
Related Stories
Business Management
How 2023's Housing Market Conditions Are Affecting the 2024 Market
Last year ended on an optimistic note, but persistent headwinds still exist to keep 2024 from getting the housing market back to pre-pandemic levels
Economics
Mortgage Applications Increase Week-Over-Week, but Rates Remain a Challenge for Buyers
Data from the Mortgage Bankers Association show slight signs of optimism in national housing market
Government + Policy
Housing Affordability Becomes Debate Topic in 2024 Presidential Election
Presidential candidates are tackling affordability issues as home price-to-income ratio reaches record high
