By Sarupya Ganguly
BENGALURU (Reuters) – Affordability of purchases for first-time U.S. homebuyers will worsen in the coming year due to tight supply and a few more interest rate cuts from the Federal Reserve, even as the average home price rises slowly, a Reuters survey of real estate experts.
Without enough entry-level housing, especially for families, affordability has long been the burning issue in the housing market of the world’s largest economy, with potential first-time homebuyers consistently priced out.
Slightly lower interest rates over the next six months won’t be enough to lure new buyers into a housing market where prices are still more than 50% higher than pre-pandemic levels, a Reuters poll of 12 real estate analysts shows. until November 27.
When it comes to expectations for purchasing affordability, 10 out of 19 respondents changed their opinion from “deteriorating” to “improving” compared to an August survey. All 26 people surveyed in August said things would improve.
‘Take the US and much of the West – they are getting older. That’s where the wealth is. They’re taking second homes, even third homes, and pricing out the younger generations who just haven’t had enough time to build up savings. ” said John LaForge, head of real asset strategy, Wells Fargo Investment Institute.
“We continue to have these large surpluses – do you have the money for down payments? Do you have savings with the younger generation? I would say we are doing better, but we are nowhere near where we need to be. “
According to recent research from Apollo Global Management, the average age of American homebuyers is 49 years old, up from 31 years old in 1981.
Average U.S. home price growth, based on the S&P CoreLogic Case-Shiller composite index of 20 metropolitan areas, will slow from 5.1% this year to 3.2% next year, and 3.5% in 2026, according to the Reuters poll medians.
These forecasts are approximately unchanged from August. That comes despite the fact that financial markets are currently pricing in only about three quarter-percentage-point rate cuts from the Fed, just half of what was expected at the time, due to concerns about a resurgence in inflation following Donald Trump’s election victory.
HOUSE PRICE RISES TO EXCEED THE RENT
Expensive homes have also forced many to continue renting; they make up just over a third of occupied homes in the US. When asked what would happen to average rental inflation in the coming year, more than 70% of respondents, 13 out of 18, said it would remain about the same or fall.
Nearly two-thirds of respondents, 13 out of 20, said average home prices will rise faster than average rents in the coming year.
