Happy New Year!
I can’t believe we are already into 2024! My wish for you is that you experience many blessings, health and good fortune for both you and your family all through the New Year. As always, it is my honor to help serve you here in the Valley of the Sun! Please reach out to me at your convenience, it’s a pleasure to help you. – Christy Crouse
For my blog this month, I’ve been reading alot about where the market might be headed in 2024 and I’d like to share some of my findings below. The bottom line first, and more commentary to follow.
Bottom line on the 2024 housing market:
The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenging one for both buyers and sellers. But rates cooled a bit at the end of 2023 — if that continues in 2024, as some experts predict, then market activity should heat up in response.
The complexities of the current conditions mean that, now more than ever, it’s smart to lean on the guidance of an experienced local real estate agent (such as myself.) If you want to enter the market in 2024, whether as a buyer or a seller, let me serve you with a red carpet welcome!
Quick Key housing market stats:
The median home-sale price as of November 2023 was $387,600, up 4 percent from one year ago, according to NAR data.
The nation had a 3.5-month supply of housing inventory as of November, per NAR, which is low enough to be considered a seller’s market.
Home-price growth rose by 3.9 percent in September 2023, marking the eighth consecutive month of increases, according to S&P CoreLogic’s latest Case-Shiller Index.
Bankrate’s latest national survey of large lenders shows the average rate on a 30-year mortgage was 6.88 percent as of December 20, 2023.
The U.S. inflation rate as of November 2023 was 3.1 percent — still a bit higher than the Fed’s stated goal of 2 percent.
Will 2024 be a buyer’s or seller’s market?
In today’s market, tight inventory gives sellers the upper hand. There are more buyers than there are homes available, so each home that comes on the market becomes more of a hot commodity than it might if there were more options to choose from. Without a significant uptick in inventory, the seller’s market seems unlikely to change next year.
“The current significant shortage of inventory suggests it would be hard to [become] a buyer’s market anytime soon,” says Hepp.
“Given expectations about interest rates and supply, demand will probably exceed supply similar to current conditions,” Zhao says. “Supply is likely to remain below what we would deem a balanced market.”
“The plague of low inventory won’t be cured in the short-term, but demand will suffer from high mortgage rates, bringing about more of a balanced market in 2024,” says McBride. “Sellers may find themselves making concessions on closing costs or rate buydowns more often in 2024, and buyers should be wary of biting off more than can be financially chewed. Home prices are at record highs in most markets, and insurance costs are up substantially in many coastal markets. You’re not getting a bargain, and the willingness to walk away might prove to be a good choice.”
Will home prices go down?
Housing prices have been on fire lately, culminating in historic highs — November’s median of $387,600 was only about $26K short of the highest monthly home price NAR has ever recorded ($413,800, set in June 2022).
So will home prices drop in 2024? Probably not, says Yun: “Home prices will rise around 3 to 4 percent,” he predicts. In a December statement, he elaborated: “Home price appreciation can only moderate from drastically improved supply. Another 30 percent rise in home construction can easily be absorbed in the marketplace, especially in light of recent weeks’ plunge in mortgage rates.”
“Sellers are likely to remain reluctant to give up their low interest rate for a much higher one, so inventory will remain constrained. As more time passes, more homeowners may be ‘forced’ to sell due to life events, so inventory may rise from the current anemic levels, but it’s unlikely to increase much. That means that prices are unlikely to fall on a year-over-year basis, unless demand falters.”
There are simply not enough homes for sale:
“There are simply not enough homes for sale,” Yun said in a statement earlier this year. “The market can easily absorb a doubling of inventory.”
For inventory levels to improve significantly, there would need to be either a surge of homeowners listing their existing properties or a huge amount of new-construction homes hitting the market. While both seem relatively unlikely, Yun does foresee some increase in housing inventory for 2024. “There will be more home construction, and more existing homeowners will be willing to sell and give up their low mortgage rates,” he says.
Will housing inventory increase?
Speaking of much-needed inventory, housing supply remained very low throughout 2023. The overall number of existing homes on the market for sale as of November sat at 1.13 million units, about even with last year’s figure of 1.12 million. That represents only a 3.5-month supply, far short of the 5 to 6 months usually needed for a balanced market.
Will housing sales decline?
While home prices have more than held firm this year, the volume of home sales has softened considerably. Existing-home sales declined for five months in a row before rising slightly in November 2023 to an annual pace of 3.82 million, according to NAR data, which represents a 7.3 percent drop year-over-year. However, these trends may pivot in 2024 if mortgage rates continue to dip.
“Retreating mortgage rates will bring more buyers and sellers to the market and get Americans moving again,” says NAR chief economist Lawrence Yun. At a NAR conference in November, Yun predicted that sales will rise by as much as 15 percent next year.
“Housing sales are expected to increase a bit from this year,” says Chen Zhao, who leads the economics team at Redfin. “However,” she qualifies, “we are not expecting sales to increase dramatically, as rates are likely to remain above 6 percent.”
“Lower mortgage rates would help spur home sales activity, which are expected to increase in 2024 compared to 2023,” says Selma Hepp, chief economist at CoreLogic. “Declines in mortgage rates will drive more sellers to trade their existing home and help add much-needed inventory to the market, leading to more transactions.”
Key takeaways:
Low levels of inventory mean that sellers continue to have the upper hand in the housing market.
Mortgage rates have come down from their peak but are still high, and steep home prices are dissuading would-be buyers.
If rates were to drop further in 2024, that would spur the market for both buyers and sellers.
With home prices historically high and inventory still very tight, many prospective sellers and hopeful buyers are feeling nervous about today’s housing market.
The median sale price for an existing home in the U.S. was $387,600 as of November 2023, the fifth straight month of year-over-year price increases. And after rising above 8 percent in October, the average 30-year mortgage rate was 6.88 percent as of late December 2023 — still higher than most homeowners’ locked-in rates, but a welcome reprieve from the recent 20-year highs.
Home prices, mortgage rates and inventory levels will all shape housing affordability in the coming year. Curious where these trends may go? Read on to learn what the experts predict for the 2024 housing market.
