U.S. Housing Starts End 2024 on High Note

  HUD reported that overall housing starts increased 15.8% in December to a seasonally adjusted annual rate of 1.50 million units. WASHINGTON—Fueled by solid demand, single-family construction increased in December despite several industry headwinds, including high mortgage rates, elevated financing costs for builders, and a lack of buildable lots. Overall housing starts increased 15.8% in December to a seasonally adjusted annual rate of 1.50 million units, according to a U.S. Department of Housing and Urban Development report and the U.S. Census Bureau. This is the highest rate since February 2024. The December reading of 1.50 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this number, single-family starts increased by 3.3% to a 1.05 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, increased 61.5% to a 449,000 pace. The total number of housing starts in 2024 was 1.36 million, a 3.9% decline from the 1.42 million total in 2023. Single-family starts totaled 1.01 million in 2024, up 6.5% from the previous year. Multifamily starts ended the year down 25% from 2023. “Single-family home building increased 6.5% for 2024, as builders added more supply in a market continuing to face a housing affordability crisis due to elevated mortgage interest rates and higher construction costs,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “Nonetheless, the industry expects to see a slight gain for single-family home building in 2025 because of a persistent housing shortage and ongoing solid economic conditions.” “While December was a solid month for apartment starts, the sector ended 2024 down 25% in total starts,” said NAHB Chief Economist Robert Dietz. “In December, and on a three-month moving average basis, there were 1.7 apartments completing construction for every one apartment starting construction. Multifamily construction will stabilize in 2025 as more deals pencil out, with the industry supported by a low national unemployment rate.” Looking at regional housing starts data for 2024, combined single-family and multifamily starts were 9.1% higher in the Northeast, 0.1% lower in the Midwest, 5.2% lower in the South and 7.7% lower in the West. Overall permits decreased 0.7% to a 1.48-million-unit annualized rate in December and were down 3.1% compared to December 2023. Single-family permits increased 1.6% to a 992,000-unit rate but were down 2.5% in December compared to the previous year. Multifamily permits decreased by 5.0% to a 491,000 pace. Regional permit data for 2024 show that permits were 1.5% higher in the Northeast, 3.5% higher in the Midwest, 3.1% lower in the South, and 6.6% lower in the West. The total number of permits in 2024 was 1.47 million, a 2.6% decline from the 1.51 million total in 2023. However, the number of single-family permits in 2024 totaled 981,000, up 6.6% from the previous year, a positive sign for 2025. The number of single-family homes under construction was 641,000, down 5.3% from a year ago. The number of apartments under construction was 790,000, down 21% from a year ago. The number of apartments under construction peaked at 1.02 million in July 2023 and has decreased since then.

2025: A Year of Stabilization and Opportunities

  NAR forecasts mortgage rates to stabilize near 6% in 2025, likely establishing a new normal. Inventory will gradually grow. CHICAGO &mdash: The year ahead is poised to bring more opportunities for homebuyers as the housing market stabilizes. The Federal Reserve is expected to maintain a gradual approach to easing monetary policy in 2025. While concerns about federal deficits and rising public debt may cap the extent of those rate cuts, borrowing costs are anticipated to stabilize overall, offering some relief to prospective buyers. However, mortgage rates are unlikely to return to the ultra-low levels seen during the pandemic or the pre-pandemic levels. Affordability will remain a concern for many, particularly in high-demand markets. The National Association of Realtors&reg forecasts mortgage rates to stabilize near 6% in 2025, likely establishing a new normal. 2025 NAR forecast: Existing home sales, 30-year fixed mortgage rate, housing starts. At this rate, more buyers are expected to return to the market, boosting activity. When mortgage rates fall below 6.5%, the qualifying income required to purchase a median-priced home drops below $100,000, less than the estimated median family income. If rates stabilize around 6%, about 6.2 million households can again afford median-priced homes, compared to the current constraints with rates near 7%. While housing shortages remain a long-term constraint, inventory levels are gradually improving and poised to increase further in 2025. This uptick is anticipated from a combination of new construction projects and homeowners deciding to list their properties, encouraged by stabilizing mortgage rates and improving market conditions. Lower rates can significantly benefit homebuilders by reducing financing costs and boosting market confidence. This is expected to lead to increased construction and housing starts approaching the historical average annual level of 1.5 million units in the next couple of years. However, despite these gains, inventory levels are still expected to fall short of pre-pandemic norms, continuing to present buyer challenges. Home prices will continue to increase in 2025, but at a slower pace compared to previous years, with increases likely to be around 2%.

When to go above or below the asking price?

  If you go in with a lowball offer on the house, you could risk offending the sellers and having them write you off completely. In short, making an offer on a home is about striking the right balance. “Your ability to present a lower offer will depend greatly on current market conditions—meaning if it’s a buyer’s market or seller’s market,” suggests Cynthia Jacinta Keskinkaya, co-founder of the Keskinkaya Dartley Team at Douglas Elliman in New York City. So, before you make any real estate purchase offer, determine what type of market you’re in. Traditionally, a buyer’s market comes with a lot of flexibility on price because available inventory is high, and houses tend to sit on the market for longer. Here, home sellers tend to be more willing to negotiate because offers are few and far between. “In a buyer’s market, I would not hesitate to submit an offer around 10% below asking,” advises Chris Cloud of Exit Heritage Realty in Haymarket, VA. “Most sellers will at least see that as worthy of a counteroffer.”

7 House Features That Buyers Always Overpay For

  Swimming Pools: Depending on where you live, a swimming pool can be a great addition to your home. However, if a swimming pool is on your list of features to have, make sure you're paying an appropriate price. "Many buyers pay a premium for homes with swimming pools, expecting it to be a significant advantage," said Kristin Hintlian, the co-founder of Bonsai Builders. "While it can certainly be a luxury, the costs associated with maintaining a pool are often underestimated. Pools require regular maintenance and cleaning and can escalate your home insurance rates." Overpriced Kitchens: If the kitchen is the crown jewel of your home, you'll want to ensure you have a bright and beautiful one. But that doesn't mean you must invest in one that costs more than all the royal family's gold. As a real estate investor and the owner and founder of Michigan Houses for Cash, Sergio Aguinaga knows a thing or two about home values. He explained that buyers often overpay for high-end kitchen upgrades, such as granite countertops or custom cabinets, that they might not need. "I advise clients to assess whether these upgrades truly add value or if they are simply driving up the home's price," he said. Luxury Bathrooms: Who doesn't love the idea of soaking in a massive whirlpool tub? Or stepping out of your slippers and standing on heated bathroom floors? According to Aguinaga, turning your bathroom into an in-home spa is appealing but costly in ways that aren't always worth the cost. "Buyers can overspend on luxury bathroom features like heated floors or whirlpool tubs. I tell clients to consider if these features are worth the price because they rarely recoup their full resale value," he said. Finished Basements: Aguinaga admitted that a finished basement can add space to a home; however, buyers should be aware of paying too much for this feature, especially if the work is poorly done. If work doesn't meet your expectations, you must go through the price negotiation process. Extensive Landscaping: Landscaping can improve a home's curb appeal, boosting its value. However, it doesn't need to be extreme. Proper landscaping can be as simple as trimmed bushes, attractive plants or flowers, and manicured grass. Some people get carried away by adding exotic plants, fountains, and other water features. While these can look great, they drastically increase the price tag and aren't exciting to everyone. If you're purchasing a home with extensive landscaping, ensure you're not paying a premium. "While a beautifully landscaped yard can undoubtedly enhance a property's appeal, it's crucial to approach this feature cautiously," said Scott Sloan, the founder of Grand Exit Property Acquisition Group. Overly Specific Customizations: You might love having a customized fish tank built into your family room if you love fish. However, that doesn't mean the next person will feel the same. This also applies to other customizations, like a sauna in the basement or a steam shower in the main bathroom. If the home's price tag reflects these upgrades, think twice. You cannot recoup your investment once you decide to sell. "I had a client that invested a significant amount of money in building a custom wine cellar in their home," said Matt Stigliano, a real estate broker at Kimberly Howell Properties. "However, when it came to selling, few prospective buyers were wine enthusiasts and didn't see the addition as justifying a higher price." Specialty Flooring: If you take pride in every home detail, you've probably considered your floors. However, according to Elyse Sarnecky, marketing director at Marketplace Homes, you don't need to invest in specialty flooring, like exotic hardwoods or upscale tiles. Many affordable options offer a similar, luxurious look without the steep price.