Monthly Report: December 2024

United States 

By most accounts, the housing market had a mixed 2024, with existing home sales suffering while new home sales performed well. Mortgage rates are slightly higher than at the start of the year despite being in a rate-cut cycle after rallying back up in recent months. The US Economy has been performing very well, perhaps much better than initially expected, but inflation remains high, which keeps construction costs elevated and, more importantly, expensive financing.

The last few months of 2024 have been positive for sales. In November (the most recent print), new single-family home sales continued their uptrend, showing a 6% increase from October and an 8.7% increase year over year. Existing home sales rose 4.8% from the previous month, the highest in eight months, beating expectations.

Fannie Mae forecasts that existing home sales will only increase marginally during 2025, as affordability due to high mortgage rates will remain poor. As a reminder, existing home sales have been at multi-year lows, levels we haven’t seen since 2010. On the contrary, Fannie Mae predicts that new home sales will continue to be resilient in the areas where this is possible. Mortgage rates are expected to drop but remain at around 6% on average, creating little room for demand creation. Overall, this means that the base case scenario is that US home prices will decelerate in growth but remain positive. Interestingly, the organization predicts that nominal wages will grow faster than house prices for the first time in over a decade, improving affordability.

Average home sales for New Houses decreased during the year, as it was a robust year with many sales on a national level. On the other hand, home prices for existing homes ended the year more than 5% up, with a multiyear low in sales.

US Mortgage applications have been tracking the 20-year mortgage rate movements as expected, primarily reacting to big swings in the rate.

United Kingdom

Nationwide house prices in the UK have been up YoY for 2024, with a strong performance in Q4. Prices have been up around 3% since September, the most bullish period. The UK Nationwide price index increased 3.7% year-on-year in November 2024 (latest print), the most since November 2022, leaving house prices just 1% shy of their ATHs seen in the summer of 2022. The Halifax House price index is already at ATHs after increasing 1.3% in November (its biggest increase since June 2022). 

The “effective” interest rate, which is the actual interest paid, on newly drawn mortgages decreased by 15 basis points to 4.61% in October, the lowest since May 2023. These price increases can be explained by the rise in mortgage applications this year, rising more than 20% and showing a lot of resilience again in Q4. The effective interest rate on new mortgages is at its lowest since the end of 2023. Inflation prints in the UK have dropped from north of 4% at the start of the year to 2.6% recently, which has allowed the BoE to cut rates by 50 bps, less than the FED despite starting earlier. 

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References

(n.d.). US Treasuries Yield Curve. US Treasuries Yield Curve. https://www.ustreasuryyieldcurve.com/

(n.d.). CME FedWatch Tool. CME Group. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

(n.d.).Trading Economics. Trading Economics. https://tradingeconomics.com/united-states/nahb-housing-market-index

(n.d.).Goldman Sachs. Goldman Sachs. https://www.goldmansachs.com/

(n.d.).Bloomberg. Bloomberg. https://www.bloomberg.com

(n.d.). FRED. Federal Reserve Economic Data. https://fred.stlouisfed.org/

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