Are we poised for a positive shift in 2024, following a challenging year marked by higher interest rates and high home prices in 2023? After withstanding those body blows from the Federal Reserve over the past two years, I would like to think so. Recent developments, including a significant drop in mortgage rates and favorable economic indicators, suggest potential relief on the horizon. In this blog post, we'll explore the current state of the housing market, analyze opportunities for buyers and sellers, and delve into expert predictions for the coming year.
The closing months of 2023 brought about substantial improvements in various economic indicators. Notably, the average weekly 30-year mortgage interest rate experienced a noteworthy decrease from 7.79% to 6.61%. Additionally, Consumer Price Index (CPI) inflation declined from 6.3% in January to 3.1% in November. The financial markets reflected this positive trend, with the S&P index rising by 25% and the Nasdaq surging by an impressive 45% in 2023. These developments set the stage for a more favorable environment in 2024.
Despite concerns of a market downturn, home prices in 2023 remained surprisingly resilient, even with the Federal Reserve's interest rate hikes. The Case-Shiller Home Price Index reported national home values hitting a new peak in 2023. Analysts attribute this stability to a nationwide housing shortage, striking a balance between low demand and low supply. As we transition into 2024, forecasts vary, with some predicting a slight decline in median home prices while others anticipate modest growth. The consensus, however, is that mortgage rates will play a pivotal role in shaping property values.
One of the most promising aspects for 2024 is the expected downward trend in mortgage rates. The Federal Reserve's decision to halt interest rate hikes has paved the way for analysts to predict a gradual decrease in mortgage rates throughout the year. The average 30-year fixed mortgage rate has already dropped from its October high. Forecasts from industry experts anticipate rates to hover around 6% by the end of 2024, reigniting interest in the real estate market.
Higher mortgage rates in recent years suppressed both home buyer demand and the plans of potential sellers. With financing costs expected to decrease, a resurgence in sales volume is on the horizon. The National Association of Realtors Chief Economist, Lawrence Yun, estimates an 18% decline in existing home sales in 2023. However, with lower mortgage rates, sales activity is predicted to rebound in 2024. Some hesitant sellers may finally list their properties, injecting much-needed inventory into the market.
While optimism exists for increased listings, there's a debate on whether it will be enough to meet demand. Some experts foresee a surge in listings as pent-up sellers enter the market, while others anticipate a potential 14% drop in inventory. The housing supply shortfall, exacerbated by a decline in new construction, may persist until more individual owners decide to sell and contribute to the inventory.
2024 is likely to bring Pent-up demand. Many of my clients have been actively looking for a home for the past 2-6 months with little luck. These are serious buyers making aggressive offers on the few desirable properties available and have been outbid repeatedly. Although inventory scarcity will likely ease in 2024, it will be a slow process that will improve as the year progresses. As we navigate the complexities of the housing market in 2024, the key lies in adapting to the changing landscape. With lower mortgage rates on the horizon, potential opportunities for both buyers and sellers emerge. Stay informed, leverage the expertise of your trusted real estate advisor, and remain flexible in this dynamic market to make the most of the evolving conditions. The signs are promising for a brighter and more active housing market in the year ahead.
Bounce Williams | Compass LA
DRE 01387798
Compass
Bounce Williams