essays on economics and economists

Essays on Economics and Economists

R. H. Coase

231 pages | 5-1/4 x 8-1/2 | © 1994

Economics and Business: Economics--History

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Essays on Economics and Economists

Ronald H. Coase Follow

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University of Chicago Press

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http://pi.lib.uchicago.edu/1001/cat/bib/1504228

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Ronald H. Coase, Essays on Economics and Economists (University of Chicago Press, 1994).

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Includes 15 previously published papers and an original preface

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Essays on Economics and Economists

Ronald h. coase.

231 pages, Paperback

First published May 2, 1994

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About this book, table of contents.

One. The Institutional Structure of Production

Two. How Should Economists Choose?

Three. Economics and Contiguous Disciplines

Four. Economists and Public Policy

Five. The Market for Goods and the Market for Ideas

Six. The Wealth of Nations

Seven. Adam Smith's View of Man

Eight. Alfred Marshall's Mother and Father

Nine. Alfred Marshall's Family and Ancestry

Ten. The Appointment of Pigou as Marshall's Successor

Eleven. Marshall on Method

Twelve. Arnold Plant

Thirteen. Duncan Black

Fourteen. George J. Stigler

Fifteen. Economics at LSE in the 1930s: A Personal View

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Excerpted from Essays on Economics and Economists by R. H. Coase . Copyright © 1994 The University of Chicago. Excerpted by permission of The University of Chicago Press. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Economic history

Economics 101

Why introductory economics courses continued to teach zombie ideas from before economics became an empirical discipline

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The environment

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Credit card nation

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Who bears the risk?

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Does capitalism make ‘non-playable characters’ of us all? An uncanny exploration

The cruelty of crypto

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Going cashless

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Finance as alchemy

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Whether above a pub or in a castle, our childhood homes leave an indelible mark

The empty basket

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How the world’s harshest lockdown hit India’s millions of migrant workers

Anthropology

Keeping the score

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A softer economics

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The worldly turn

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.chakra .wef-1t4fkg7{margin-top:16px;margin-bottom:16px;line-height:normal;color:#ffffff;display:block;background:#000000;margin:0px;font-size:2.5rem;padding-left:16px;padding-right:16px;padding-bottom:12px;border-radius:0.25rem;border-top-left-radius:0;border-bottom-left-radius:0;-webkit-box-decoration-break:clone;-webkit-box-decoration-break:clone;box-decoration-break:clone;}@media screen and (min-width:37.5rem){.chakra .wef-1t4fkg7{display:inline;}}@media screen and (min-width:56.5rem){.chakra .wef-1t4fkg7{font-size:4rem;}} 'Cautious optimism': Here's what chief economists think about the state of the global economy

Domestic politics has also emerged as a risk for the global economy. Image: Unsplash/Pedro Lastra

.chakra .wef-1c7l3mo{-webkit-transition:all 0.15s ease-out;transition:all 0.15s ease-out;cursor:pointer;-webkit-text-decoration:none;text-decoration:none;outline:none;color:inherit;}.chakra .wef-1c7l3mo:hover,.chakra .wef-1c7l3mo[data-hover]{-webkit-text-decoration:underline;text-decoration:underline;}.chakra .wef-1c7l3mo:focus,.chakra .wef-1c7l3mo[data-focus]{box-shadow:0 0 0 3px rgba(168,203,251,0.5);} Aengus Collins

Kateryna karunska.

• The near-term outlook for the global economy is looking brighter, according to the latest Chief Economists Outlook .
• Yet the report found that uncertainty and volatility remain, with domestic and international politics continuing to be a factor.
• Almost seven in 10 expect global growth to return to 4% in the next five years.

Despite geopolitical tensions and lingering economic headwinds, the outlook for the global economy is improving.

The May 2024 Chief Economists Outlook from the World Economic Forum found that just 17% of economists surveyed expect conditions to worsen this year, a significant improvement compared to the 56% recorded in January.

"Uncertainty persists, but signs of brightening are reflected in the latest survey," the report notes. "The developing economic mood is one of cautious optimism."

The Chief Economists Outlook , published three times a year, surveys leading chief economists from across industries and international organizations. The latest edition explores key trends in the global economy, including the latest outlook for growth and inflation, the implications of recent geopolitical and domestic political developments and prospects of reviving medium-term growth.

"Many of the global developments that have been highlighted as sources of heightened volatility and complexity in this and recent editions of the Chief Economists Outlook – including geopolitical rifts and technological transformation – have profound and far-reaching implications for the future pace and trajectory of the global economy," the report states.

Sources of volatility

While some of the sharpest near-term risks to the global economy may have eased, uncertainty remains high, and the chief economists highlighted a number of potentially disruptive factors.

Nearly all respondents (97%) expect international geopolitics to cause global economic volatility throughout 2024, up from 90% in September 2023.

Global economy nears soft landing, says IMF

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Domestic politics has also emerged as a risk for the global economy. More than eight in 10 respondents (83%) said domestic politics will be a source of volatility in 2024 – a year when more than half the world's population is set to go to the polls.

Chief economists were more sanguine about the immediate impacts of advanced technologies such as artificial intelligence (AI). In fact, most chief economists (69%) disagree that AI will be a source of volatility in 2024.

Regional dynamics are mixed

The outlook for economic growth varies significantly by region, according to the chief economists.

There has been a notable uptick in optimism on the economic prospects of the United States. Nearly all the chief economists surveyed (97%) now expect moderate or stronger growth in the American economy in 2024, up from 59% in January.

Chief economists foresee consistently buoyant activity in the economies of Asia.

Asia remains a source of optimism, too. All of the respondents expect at least moderate growth in South Asia and East Asia and the Pacific this year. In South Asia, in particular, growth prospects have improved significantly, with 70% expecting strong or very strong growth in the region this year, up from 52% in January.

The expectations for China are somewhat more muted, as weak consumption data and ongoing property market woes dampen the near-term outlook. About three-quarters of chief economists foresee moderate growth in China this year and only 4% predict strong growth in 2024.

The outlook is considerably more pessimistic for Europe, with almost seven in 10 expecting weak growth in 2024 and none of the respondents predicting strong or very strong growth.

For the rest of the world, the majority of chief economists expect moderate growth, with a slight improvement in expectations since January.

Inflation expectations vary across regions too, but the extent of this variation has begun to diminish, and the latest results reveal convergence towards a moderate outlook for inflation.

expect moderate inflation in the US

Expect moderate inflation in europe.

In the US, around two-thirds of chief economists expect moderate inflation to persist this year. The outlook is generally unchanged in Europe, where 57% of respondents expect moderate inflation and a quarter expect low inflation.

China remains an outlier in terms of the presence of deflationary risks. More than eight in 10 chief economists expect low or very low inflation this year, with the share of those predicting very low inflation almost doubling since January. Elsewhere, expectations of low inflation have also strengthened in East Asia and the Pacific (43%) and in Central Asia (32%), up by more than 10 percentage points since January.

Challenges for businesses and policymakers

The current global economic landscape makes for a tough decision-making environment for businesses and policymakers, according to the chief economists. Almost eight in ten expect heightened complexity to be a growing challenge for public and private sector leaders throughout 2024.

An even higher share of respondents said the same about tensions between politics and economics (86%), as increasing polarization and volatility in domestic politics become more prominent with the wave of elections this year.

Looking at the factors expected to drive corporate decision making this year, both economic and political factors feature prominently, as the graphic above illustrates. Notably, almost twice as many chief economists said companies’ growth targets will drive decision-making as those that think the same about companies’ environmental and social targets.

The longer-term view

Encouragingly, the chief economists’ relative optimism about the outlook for economic growth stretches beyond the short term. At a time when many medium-term forecasts have been slashed—the International Monetary Fund (IMF) forecast of global growth of 3.1% five years from now is at its lowest in decades—the chief economists see the possibility of a sustained rebound in growth.

Responding to the growing challenges facing the world requires more than a simple increase in the rate of growth.

Almost seven in ten said they expect global growth to return to 4% within the next five years, and four in ten expect that within the next three years. That would mark a welcome improvement in the global economy, although it is worth noting that a minority of respondents (23%) do not share this optimism and said that they do not expect the global economy to return to 4% growth over any timeframe.

Looking at the potential drivers of growth over the next five years, the chief economists are unambiguous in expecting technological transformation, AI, and the green and energy transition to play a positive role, particularly in high-income economies. By contrast, there is a strong consensus that geopolitics, domestic politics, debt levels, climate change and social polarization are set to dampen growth in both high- and low-income economies.

Looking at what policy-makers can do to boost growth in the next five years, chief economists highlighted innovation, infrastructure development, education and skills development, and monetary policy as the most effective policy levers regardless of countries’ income levels. Policy action in a number of other areas – including institutions, social services and access to finance – are expected to be more beneficial for low-income than high-income economies. There is a notable lack of consensus among the chief economists on the likely growth impact of environmental and industrial policies.

The societal implications of many of these policy areas extends well beyond growth, to cover distinct goals and values related to issues such as sustainability and inequality. With this in mind, the latest Chief Economists Outlook concludes by noting that economic policy increasingly needs to "focus on the character or composition of economic activity" around the world.

"Responding to the growing challenges facing the world requires more than a simple increase in the rate of growth," the report states.

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Paul Krugman

Should Biden Downplay His Own Success?

By Paul Krugman

Opinion Columnist

The performance of America’s economy over the past two years has been remarkable, especially given the dire predictions of many observers. Remember the economists who forecast a recession in 2023? Remember all those warnings that getting inflation down would require years of high unemployment?

Instead, our economic growth has been the envy of other wealthy nations . Stocks are way up since President Biden took office. Inflation has declined sharply and unemployment is still below 4 percent. The latest numbers seem to support the view that the apparent acceleration of prices earlier this year was a statistical blip, and that disinflation is still on track.

Yet there’s still a lingering conventional wisdom that says Biden shouldn’t trumpet his economic record. The Washington Post’s editorial board just wrote that “Telling Americans the economy is good won’t work.” The Financial Times’s editorial board wrote that “The president’s state of the nation address in March was littered with superlatives about the economy” but that his messaging “risks negating the experience of voters on the ground” — basically saying that Biden shouldn’t talk about his economic achievements, even implying that he should try to relate to voters by acknowledging that the economic picture out there is bad, which it isn’t.

Now, I am neither a political strategist nor a political historian, but I think I know enough to say that a 21st-century replay of Jimmy Carter’s infamous so-called malaise speech would be a bad move.

That said, telling voters to buck up and realize how good they have it would also be a bad move. But has anyone in the Biden administration said anything like that? It would be pretty obtuse if they had. But I’m not aware of any examples. As far as I can tell, administration officials, including Biden himself, talk about low unemployment, falling inflation and rising real wages — and do so very carefully, studiously avoiding the bombast and excessive boasting so common in the previous administration. But even mentioning good economic news is supposedly an affront to everyday Americans because it amounts to denying their lived experience.

Which brings me to a point I’ve been pounding on for a while that bears repeating: There’s overwhelming evidence that most Americans’ negative views about the economy don’t reflect their lived experience.

Here’s a relatively new example: fast food. Recently, the online lending marketplace LendingTree released the results of a survey in which nearly 80 percent of Americans said that inflation has turned fast food into a luxury they’re forced to consume less often. And indeed, fast food prices have gone up quite a bit in recent years.

But they haven’t surged to the extent that legend has it. Those headlines you see that say McDonald’s prices have doubled? They’re usually referring to prices from a decade ago , and are wrong even so.

A few days after that survey was released, management at McDonald’s issued an open letter responding to hyperbolic claims about the chain’s prices. Since 2019 (the last full year before the economic shocks of the Covid-19 pandemic), McDonald’s reports, the price of a Big Mac hasn’t doubled; it’s up 21 percent. That’s still substantial, but it’s less than the rise in the median worker’s earnings over the same period of time.

And it’s worth looking at what people are actually doing. Spending at restaurants was up 7 percent from March 2023 to March 2024; some of this was inflation, but not all of it , so Americans seem to be buying quite a lot of a luxury good they say they can’t afford.

To be clear, nobody is suggesting that Biden administration officials should tell Americans to sit down, eat their Happy Meals and stop complaining. And from my own conversations I can tell you that these officials are well aware that they have limited ability to change a negative economic narrative that has become widely entrenched, even if it’s inaccurate. But demands that Biden stay quiet about good economic news — particularly when there’s a lot of good economic news to talk about — seem to be saying that he should in effect validate misinformation. Why would anyone consider this a good idea?

Well, here’s my take: As I said, I’m no political consultant, but people telling Biden to downplay the fact that his big spending has worked out well for the economy are to some degree revealing their own ideological biases rather than giving solid political advice.

The situation today is not unlike what we saw in the early 2010s, when policy pivoted far too soon from fighting unemployment to obsessing about deficits , making it harder to make the case that sometimes government activism really does work. In the same way that the Great Recession became fodder for deficit hawks, for a little while, the inflation surge in 2021 and 2022 became glory days for the inflation hawks.

But it turned out that they were wrong: The almost painless disinflation of 2023 largely vindicated Biden economists, who argued early on that post-Covid inflation wasn’t the second coming of the 1970s, that it most resembled inflation after World War II — a transitory burst that ended as supply chains normalized. The “transitory” part ended up taking a bit longer than expected, but they were basically right.

So how should Biden and his people talk about the economy now? I’d suggest that they simply tell the truth as they see it. Which, as far as I can tell, is what they’ve been doing all along.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips . And here’s our email: [email protected] .

Follow the New York Times Opinion section on Facebook , Instagram , TikTok , WhatsApp , X and Threads .

Paul Krugman has been an Opinion columnist since 2000 and is also a distinguished professor at the City University of New York Graduate Center. He won the 2008 Nobel Memorial Prize in Economic Sciences for his work on international trade and economic geography. @ PaulKrugman

First Vice President, COO and Fed System Treasury Director Kathy O’Neill to Retire

Kathy O’Neill

ST. LOUIS — The Federal Reserve Bank of St. Louis today announced First Vice President, Chief Operating Officer and Federal Reserve System Treasury Director Kathy O’Neill intends to retire effective Aug. 15, 2024. O’Neill’s retirement comes after a 36-year career of dedicated public service to the Bank, the Federal Reserve’s Eighth District and the Federal Reserve System.

“Kathy’s commitment to the St. Louis Fed and the Federal Reserve System has been remarkable,” St. Louis Fed President Alberto Musalem said. “Over her career, she provided strong leadership during significant change in the banking system, the payments industry and the Fed System. She also helped steer the Bank through executive leadership changes and the pandemic. As a highly collaborative colleague, she has been instrumental in the overall performance and culture of the Bank, and in strengthening the fiscal agency relationship between the Fed System and the U.S. Treasury.”

Musalem added, “Kathy has always focused on talent development and diversity, equity and inclusion, helping to mentor and advance the careers of many in the Bank and System. I am also grateful for her distinguished service as interim president of the Bank and for the support she has given to me so far. I am looking forward to continuing to work closely with her during the next several months.”

A search committee comprising President Musalem and St. Louis Fed Class B and Class C directors (those not affiliated with a financial institution) will conduct a selection process to replace O’Neill, subject to approval by the Board of Governors of the Federal Reserve System.

O’Neill has served as first vice president, COO and Treasury director since Jan. 1, 2021, and has responsibility for the St. Louis Fed’s day-to-day operations throughout the entire Eighth District. She chairs the Bank’s Management Committee and leads the Fed System’s overall fiscal agency relationship with the U.S. Treasury.

O’Neill assumed the duties of interim Bank president following the retirement of James Bullard in July 2023 until Musalem’s appointment in April 2024. She participated in six meetings of the Federal Open Market Committee (FOMC) during that time.

“Working at the St. Louis Fed has truly been an honor and a privilege. I am proud of what we do to foster an economy that works for all,” O’Neill said. “I am grateful to have had the opportunity to partner with many dedicated, diverse and distinguished individuals over the course of my career, and I hope to leave behind a legacy of excellence, empowerment, integrity and inclusion throughout the organization.”

A native of Chicago and a graduate of the University of Illinois, O’Neill joined the Federal Reserve Bank of Chicago in February 1988 as a product manager in the Financial Services department. She moved to the St. Louis Fed in August 1989 to take a similar product management role. During her Fed career, she has held a variety of positions of increasing responsibility in the Operations, Public Affairs, Financial Services and Business Development functions. She also performed numerous leadership roles in the Fed System during her tenure. In February 2001, she joined the newly established Treasury Relations and Support Office (TRSO) as vice president and helped establish and enhance the Fed System’s fiscal agency support functions for the U.S. Treasury. She was promoted to senior vice president in charge of the TRSO and Treasury Operations functions in 2009. She has worked closely with Fed System and Treasury leaders to guide this national fiscal agency support function for the last 23 years.

O’Neill is also a graduate of the Kellogg School of Business’ Executive Leadership Program at Northwestern University and serves on the Board of Trustees for Webster University and the Chair’s Council of Greater St. Louis, Inc.

Contact Laura Girresch

Office: (314) 444-6166

Cell: (314) 348-3639

• Data library

2024 Housing Market Forecast and Predictions: Housing Affordability Finally Begins to Turnaround

As we look ahead to 2024 , we see a mix of continuity and change in both the housing market and economy. Against a backdrop of modest economic growth, slightly higher unemployment, and easing inflation longer term interest rates including mortgage rates begin a slow retreat. The shift from climbing to falling mortgage rates improves housing affordability, but saps some of the urgency home shoppers had previously sensed. Less frenzied housing demand and plenty of rental home options keep home sales relatively stable at low levels in 2024, helping home prices to adjust slightly lower even as the number of for-sale homes continues to dwindle. 

Realtor.com ® 2024 Forecast for Key Housing Indicators

Home Prices Dip, Improving Affordability

Home prices grew at a double-digit annual clip for the better part of two years spanning the second half of 2020 through 2022, a notable burst following a growing streak that spanned back to 2012. As mortgage rates climbed, home price growth flatlined, actually declining on an annual basis in early 2023 before an early-year dip in mortgage rates spurred enough buyer demand to reignite competition for still-limited inventory. Home prices began to climb again, and while they did not reach a new monthly peak, on average for the year we expect that the 2023 median home price will slightly exceed the 2022 annual median.

Nevertheless, even during the brief period when prices eased, using a mortgage to buy a home remained expensive. Since May 2022, purchasing the typical for-sale home listing at the prevailing rate for a 30-year fixed-rate mortgage with a 20% down payment meant forking over a quarter or more of the typical household paycheck. In fact, in October 2023, it required 39% of the typical household income and this share is expected to average 36.7% for the full calendar year in 2023. This figure has typically ranged around 21%, so it is well above historical average. We expect that the return to pricing in line with financing costs will begin in 2024, and home prices, mortgage rates, and income growth will each contribute to the improvement. Home prices are expected to ease slightly, dropping less than 2% for the year on average. Combined with lower mortgage rates and income growth this will improve the home purchase mortgage payment share relative to median income to an average 34.9% in 2024, with the share slipping under 30% by the end of the year.

Home Sales Barely Budge Above 2023’s Likely Record Low

After soaring during the pandemic, existing home sales were weighed down in the latter half of 2022 as mortgage rates took off, climbing from just over 3% at the start of the year to a peak of more than 7% in the fourth quarter. The reprieve in mortgage rates in early 2023, when they dipped to around 6%, brought some life to home sales, but the renewed climb of mortgage rates has again exerted significant pressure on home sales that is exacerbated by the fact that a greater than usual number of households bought homes over the past few years, and despite stories of pandemic purchase regret , for the most part, these homeowners continue to be happy in their homes. 

This is consistent with what visitors to Realtor.com report when asked why they are not planning to sell their homes. The number one reason homeowners aren’t trying to sell is that they just don’t need to; concern about losing an existing low-rate mortgage is the top financial concern cited. Our current projection is for 2023 home sales to tally just over 4 million, a dip of 19% over the 2022 5 million total. 

With many of the same forces at play heading into 2024, the housing chill will continue, with sales expected to remain essentially unchanged at just over 4 million. Although mortgage rates are expected to ease throughout the course of the year, the continuation of high costs will mean that existing homeowners will have a very high threshold for deciding to move, with many likely choosing to stay in place.  Moves of necessity–for job changes, family situation changes, and downsizing to a more affordable market–are likely to drive home sales in 2024. 

Shoppers Find Even Fewer Existing Homes For Sale

Even before the pandemic, housing inventory was on a long, slow downward trajectory. Insufficient building meant that the supply of houses did not keep up with household formation and left little slack in the housing market. Both homeowner and rental vacancy remain below historic averages . In contrast with the existing home market, which remains sluggish, builders have been catching up, with construction remaining near pre-pandemic highs for single-family and hitting record levels for multi-family . 

Despite this, the lack of excess capacity in housing has been painfully obvious in the for-sale home market. The number of existing homes on the market has dwindled. With home sales activity to continue at a relatively low pace, the number of unsold homes on the market is also expected to remain low.  Although mortgage rates are expected to begin to ease, they are expected to exceed 6.5% for the calendar year. This means that the lock-in effect, in which the gap between market mortgage rates and the mortgage rates existing homeowners enjoy on their outstanding mortgage, will remain a factor. Roughly two-thirds of outstanding mortgages have a rate under 4% and more than 90% have a rate less than 6%.

Rental Supply Outpaces Demand to Drive Mild Further Decline in Rents

After almost a full year of double-digit rent growth between mid-2021 and mid-2022, the rental market has finally cooled down, as evidenced by the year-over-year decline that started in May 2023 . In 2024, we expect the rental market will closely resemble the dynamics witnessed in 2023, as the tug of war between supply and demand results in a mild annual decline of -0.2% in the median asking rent.

New multi-family supply will continue to be a key element shaping the 2024 rental market.  In the third quarter of 2023, the annual pace of newly completed multi-family homes stood at 385,000 units. Although absorption rates remained elevated in the second quarter, especially at lower price points, the rental vacancy rate ticked up to 6.6% in the third quarter. This uptick in rental vacancy suggests the recent supply has outpaced demand, but context is important. After recent gains, the rental vacancy rate is on par with its level right before the onset of the pandemic in early 2020, still below its 7.2% average from the 2013 to 2019 period.  Looking ahead, the strong construction pipeline– which hit a record high for units under construction this summer –is expected to continue fueling rental supply growth in 2024 pushing rental vacancy back toward its long-run average. 

While the surge in new multi-family supply gives renters options, the sheer number of renters will minimize the potential price impact. The median asking rent in 2024 is expected to drop only slightly below its 2023 level. Renting is expected to continue to be a more budget friendly option than buying in the vast majority of markets, even though home prices and mortgage rates are both expected to dip, helping pull the purchase market down slightly from record unaffordability. 

Young adult renters who lack the benefit of historically high home equity to tap into for a home purchase will continue to find the housing market challenging. Specifically, as many Millennials age past first-time home buying age and more Gen Z approach these years, the current housing landscape is likely to keep these households in the rental market for a longer period as they work to save up more money for the growing down payment needed to buy a first home. This trend is expected to sustain robust demand for rental properties. Consequently, we anticipate that rental markets favored by young adults , a list which includes a mix of affordable areas and tech-heavy job markets in the South, Midwest, and West, will be rental markets to watch in 2024.

Key Wildcards:

• Wildcard 1: Mortgage Rates With both mortgage rates and home prices expected to turn the corner in 2024, record high unaffordability will become a thing of the past, though as noted above, the return to normal won’t be accomplished within the year. This prediction hinges on the expectation that inflation will continue to subside, enabling the recent declines in longer-term interest rates to continue. If inflation were to instead see a surprise resurgence, this aspect of the forecast would change, and home sales could slip lower instead of steadying.
• Wildcard 2: Geopolitics In our forecast for 2023 , we cited the risk of geopolitical instability on trade and energy costs as something to watch. In addition to Russia’s ongoing war in Ukraine, instability in the Middle East has not only had a catastrophic human toll, both conflicts have the potential to impact the economic outlook in ways that cannot be fully anticipated. 
• Wildcard 3: Domestic Politics: 2024 Elections In 2020, amid the upheaval of pandemic-era adaptations, many Americans were on the move. We noted that Realtor.com traffic patterns indicated that home shoppers in very traditionally ‘blue’ or Democratic areas were tending to look for homes in markets where voters have more typically voted ‘red’ or Republican. While consumers also reported preferring to live in locations where their political views align with the majority , few actually reported wanting to move for this reason alone. 

Housing Perspectives:

What will the market be like for homebuyers, especially first-time homebuyers.

First-time homebuyers will continue to face a challenging housing market in 2024, but there are some green shoots. The record-high share of income required to purchase the median priced home is expected to begin to decline as mortgage rates ease, home prices soften, and incomes grow. In 2023 we expect that for the year as a whole, the monthly cost of financing the typical for-sale home will average more than $2,240, a nearly 20% increase over the mortgage payment in 2022, and roughly double the typical payment for buyers in 2020. This amounted to a whopping nearly 37% of the typical household income. In 2024 as modest price declines take hold and mortgage rates dip, the typical purchase cost is expected to slip just under $2,200 which would amount to nearly 35% of income. While far higher than historically average, this is a significant first step in a buyer-friendly direction.

How can homebuyers prepare? 

Homebuyers can prepare for this year’s housing market by getting financially ready. Buyers can use a home affordability calculator , like this one at Realtor.com to translate their income and savings into a home price range. And shoppers can pressure test the results by using a mortgage calculator to consider different down payment, price, and loan scenarios to see how their monthly costs would be impacted. Working with a lender can help potential buyers explore different loan products such as FHA or VA loans that may offer lower mortgage interest rates or more flexible credit criteria. 

Although prices are anticipated to fall in 2024, housing costs remain high, and a down payment can be a big obstacle for buyers. Recent research shows that the typical down payment on a home reached a record high of $30,000 .  To make it easier to cobble together a down payment, shoppers can access information about down payment assistance options at Realtor.com/fairhousing and in the monthly payment section of home listing pages. Furthermore, home shoppers can explore loan products geared toward helping families access homeownership by enabling down payments as low as 3.5% in the case of FHA loans and 0% in the case of VA loans .

What will the market be like for home sellers?

Home sellers are likely to face more competition from builders than from other sellers in 2024. Because builders are continuing to maintain supply and increasingly adapting to market conditions, they are increasingly focused on lower-priced homes and willing to make price adjustments when needed. As a result, potential sellers will want to consider the landscape for new construction housing in their markets and any implications for pricing and marketing before listing their home for sale.

What will the market be like for renters?

In 2024, renting is expected to continue to be a more cost-effective option than buying in the short term even though we anticipate the advantage for renting to diminish as home prices and mortgage rates decline. 

However, for those considering the pursuit of long-term equity through homeownership, it’s essential to not only stay alert about market trends but also to carefully consider the intended duration of residence in their next home. When home prices rise rapidly, like they did during the pandemic, the higher cost of purchasing a home may break even with the cost of renting in as little as 3 years. Generally, it takes longer to reach the breakeven point, typically within a 5 to 7-year timeframe. Importantly, when home prices are falling and rents are also declining, as is expected to be the case in 2024, it can take longer to recoup some of the higher costs of buying a home. Individuals using Realtor.com’s Rent vs. Buy Calculator can thoroughly evaluate the costs and benefits associated with renting versus buying over time and how many years current market trends suggest it will take before buying is the better financial decision. This comprehensive tool can provide insights tailored to a household’s specific rent versus buying decision and empowers consumers to consider not only the optimal choice for the current month but also how the trade-offs evolve over several years.

Local Market Predictions:

All real estate is local and while the national trends are instructive, what matters most is what’s expected in your local market. 

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