December and full-year 2024 figures released by ICE Mortgage Technology this week offer a mixed bill of health for America's housing market, as homeownership costs remain a persistent barrier to buyers and national inventory levels near pre-pandemic levels.
Home affordability has deteriorated slightly since late 2023, ICE notes, remaining near all-time lows, when only taking into account the principal and interest (P&I) portion of the mortgage payment for borrowers putting 20% down (conventional borrowers).
In December, it required slightly more than a third of median household income (33.5%) to make the P&I payments on an average-priced home, whereas last year it required 32.5% of median household income.
"Given the disparity of inventories across the country it is no surprise to see 18 of the 20 strongest housing markets from a price growth perspective located in inventory-starved portions of the Midwest and Northeast," commented Andy Walden, Head of Mortgage and Housing Market Research for Intercontinental Exchange, on this week's report.
Home affordability extends far beyond the P&I portion of monthly mortgage payments though, as ICE previously reported in September.
Recent reporting from LERETA, a firm that partners with mortgage servicers, indicates surging escrow costs are becoming a growing burden for a growing number of homeowners, as the overall home affordability equation becomes more complicated. Costs to keep a roof overhead are through the ceiling, recent studies show, and consumer confidence regressed last month.
Indeed, ICE's latest Mortgage Monitor Report indicates "climate events are a focal point for the market entering 2025," as NMP has reported on at length. Mortgage, housing, and insurance experts agree that escalating homeownership costs driven by a deteriorating home insurance market has created the conditions for a mortgage crisis that would wreak havoc on U.S. taxpayers.
“Early data shows financial pressures building among homeowners impacted by the ongoing California wildfires, while at the same time, more than 56K homeowners are still struggling to get back on track with monthly payments across seven states in the wake of last year’s major hurricanes," Walden added. Meanwhile, older homeowners continue piling into climate-risky markets.
And now, mortgage markets face the prospect of even higher rates for longer, tariff-driven crimps on new home construction, denial among policymakers of climate change's escalating impact on housing, rising unemployment on account of mass government layoffs, and a worsening cost-of-living crisis.
Despite affordability pressures, housing demand remains relatively resilient, ICE reports — which is to say, though mortgage applications remain subdued, many consumers still want to buy houses. Economists at Fannie Mae say affordability and lock-in effects will define the 2025 housing market, as overall costs remain elevated into 2026.
Commenting on the 2025 affordability outlook, First American Chief Economist Mark Fleming says homebuyers can expect "a modest 2 percent improvement in affordability by the end of the year," if mortgage rates and home price gains moderate as expected. That being said, Fleming adds, "affordability will remain over 70 percent worse than in pre-pandemic December 2019."
Following three months of consecutive cuts, the Federal Reserve held its benchmark borrowing rate in the range of 4.25%-4.5% at the conclusion of January's Federal Open Market Committee (FOMC) meeting last week, much to President Trump's ire, but not the broader market's.
ICE notes composite interest-rate forecasts projecting mortgage rates will end 2025 near 6.5%, which marks a notable upward shift from December. ICE U.S. Conforming 30-year Fixed Mortgage Rate Lock Weighted APR Index Futures as of Jan. 21, 2025, imply 30-year rates will be near 6.6% by July 2025.
Inventory-wise, ICE reports, the number of homes listed for sale grew by 22% nationally in 2024, with the deficit relative to pre-pandemic levels falling from -36% to -22%, leaving for-sale inventory at its strongest level since mid-2020.
Specifically, ICE says 25% of major markets primarily in the southern and southeastern U.S. have seen the number of homes listed for sale return to pre-pandemic levels, with approximately 15% more on pace to ‘normalize’ in 2025. Outliers of this trend are the Midwest and Northeast, where “much deeper deficits” remain and most markets in those regions “are not on pace to ‘normalize’ until 2027 or beyond.”
After consecutive years of rapid price gains from 2020-2022, a national cooling trend for home prices is expected to continue through 2026, accelerated in some regional markets by affordability pressures and rising for-sale inventories. ICE reports that annual home price growth rose in December, and ended 2024 3.4% higher nationally, marking “the lowest calendar year home price growth of any year since 2011 when the housing market was nearing its trough following the Great Financial Crisis.”
Among the 50 largest housing markets, Buffalo, N.Y., observed the largest home price gains in 2024 at +9.3%, according to ICE, followed by Hartford, Conn. (+9.0%), Providence, R.I. (+8.5%), Cleveland, Ohio (+7.9%), and Detroit, Mich. (+7.9%). Home prices fell most significantly in Austin, Texas (-2.9%) in 2024, followed by Tampa, Fla. (-2.0%,) San Antonio, Texas (-1.5%), Jacksonville, Fla. (-1.1%), and Orlando, Fla. (-0.1%).
“Home prices in the Sunshine State will be worth watching closely as we make our way through 2025,” ICE wrote, considering eight of Florida’s nine-largest markets saw home price depreciation in 2024 due to slower migration, rising insurance costs, and stagnating for-sale inventories.
