As we enter a new year, the housing market remains ever-evolving. It’s shaped by many factors, ranging from mortgage rates to inventory levels to the pricing of listings. In this blog, we say goodbye to 2023 and explore the anticipated 2024 real estate forecast. Whether you're a prospective buyer or seller, we’re here to help prepare you for what’s to come.
Let’s Recap the 2023 Real Estate Market
The year 2023 was a wild ride, especially for those dreaming of owning their own home. Mortgage rates went up like a rocket, reaching 7.79% in October. The median home price got past $400,000 in the third quarter. Plus, monthly payments were rising and hit an all-time high of an average of $2,306 in July.
As overwhelming as all of that is, there’s still hope! This year might be the ideal time for some individuals to purchase a home. Let’s dive in.
4 Predictions for the 2024 Real Estate Forecast
#1: Mortgage Rates Will Decrease
Mortgage rates posed a significant hurdle for homebuyers throughout 2023. Starting the year on a downward trend, they swiftly reversed course, hit heights not seen in two decades, and even skirted around the 8% mark.
Recently, however, there's been a change in the air. The last couple of months have seen a dip in rates. Factors such as a slower economy, a weakening job market, and a consistent fight against inflation led the Federal Reserve to maintain the federal funds rate and hint at potential rate cuts in 2024.
This shift has caused a ripple effect. The yields on 10-year Treasuries, which often influence mortgage rates, have slipped. Freddie Mac's 30-year fixed-rate loan marked a dip, settling below 7% for the first time since mid-August. Experts agree the downward trend will continue in the new year!
The National Association of Realtors envisions rates averaging below 7% as the spring buying season kicks off, settling around 6.3% by year-end. Realtor.com predicts the average rates to conclude at 6.5% by the end of 2024. As we wrapped up December 2023 with rates averaging 6.61% and a downward trend, the likelihood of rates staying below 7% this year seems promising.
Note: This is not guaranteed, and there’s a wide range of predictions for how low rates will go.
#2: Inventory Will Increase
In the past year, sellers hesitated to list their homes. Many were reluctant to relinquish the enticingly low mortgage rates they had secured. Consequently, the 2023 housing market suffered from a scarcity of available homes for prospective buyers.
However, there's a silver lining in the forecast for 2024. Buyers can anticipate an increase in the number of homes hitting the market. Lawrence Yun, the chief economist at NAR, predicts a potential surge in inventory, possibly up to 30% higher than last year.
Skylar Olsen, the chief economist at Zillow, highlights an intriguing trend in recent research. Homeowners who made their purchases during the 5% to 6% rate range have started reconsidering their expectations regarding the lowest possible rates. Olsen notes that these homeowners have become "much less sensitive" to the rate-lock effect, indicating that the threshold they consider "low enough" to prompt a home sale is on the rise.
#3: Home Prices Will Remain Stable
While the housing supply and mortgage rates are anticipated to show some signs of improvement, the factors contributing to the sustained high prices of homes are expected to remain the same.
The disparity between housing supply and demand remains stark. Before the pandemic, active listings averaged over 1 million homes. However, as of the end of November 2023, the count stood at 754,846, according to the St. Louis Fed.
So, what does this imbalance signify for the real estate market? With buyers contending for a limited pool of available homes, the pressure pushing home prices upward remains intact. Therefore, at a national level, drastic price drops are unlikely. Most experts predict that home prices will either remain stable or experience a marginal decrease of approximately 1% in 2024.
#4: Home Sales Will Rise
Anticipated improvements in the overall market conditions have led many housing analysts to predict an upturn in sales for the upcoming year. However, there's a disparity in opinions regarding the extent of this improvement.
The projections for home sales span a broad spectrum. Realtor.com gives the most cautious estimate, forecasting a marginal 0.1% year-over-year increase in existing home sales, roughly amounting to about 4 million homes sold. Conversely, NAR offers a far more optimistic outlook, predicting a substantial 13.5% surge in sales compared to 2023.
At the core of these predictions lies the pivotal factor—expectations surrounding the trajectory of mortgage rates. We can only assume that a continued decline in rates will draw in more prospective buyers and might even encourage some homeowners to list their properties for sale.
Unlock 2024's Real Estate Potential with BlueWest Properties
As we wrap up our dive into the 2024 real estate forecast, one thing remains clear: the housing market is full of potential and possibilities for both buyers and sellers!
Are you ready to make a move in this exciting market? Whether you're looking to buy your dream home or sell your current property, BlueWest Properties is here to guide you every step of the way. Our team is equipped with the expertise and dedication to help you navigate these forecasts and turn your real estate aspirations into reality.
Give us a call today to kickstart your real estate journey in 2024!