Existing home sales are expected to improve in 2024 after two years of sharp decline. But first, this part of the housing market will have to weather the rest of his difficult year in 2023, with existing home sales ultimately expected to decline by 18%. That's an increase from 2022, according to the National Association of REALTORS®. This puts these trades on track for their worst year in more than a decade.
NAR Chief Economist Lawrence Yun discussed sales forecasts for 2024 with other leading housing analysts on Tuesday at NAR's Virtual Real Estate Forecast Summit, where experts predicted better days ahead for the real estate market. I agreed to come.
Mortgage rates have likely peaked and are currently down from recent highs of nearly 8%. NAR projects that 30-year fixed-rate mortgages will average 6.3% in 2024. 6.5% for realtor.com® projects. This is likely to improve housing affordability and encourage more homebuyers to return to the market, Yun said. NAR data shows that with interest rates close to 6.6%, the average American family would be able to pay less than the median home price (a common measure of affordability) without spending more than 30% of their income on housing. (standards used for) can be purchased.
NAR predicts that existing home sales will increase 13.5% and new home sales will buck market trends by about 5% this year and could rise another 19% by the end of next year.
Markets to watch in 2024
Some housing markets are expected to see higher sales growth in 2024 than others. “Job growth will be the determining factor for housing demand in the long term,” Yun said.
NAR evaluated the 100 largest metropolitan areas in the United States to identify the markets with the largest number of potential homebuyers and the highest potential for home price appreciation. According to NAR, the following markets will have the highest demand for pent-up housing in 2024:
- Austin – Round Rock – Georgetown, Texas
- Dallas-Fort Worth-Arlington, Texas
- Dayton Kettering, Ohio
- Durham, North Carolina – Chapel Hill
- Harrisburg Carlisle, Pennsylvania
- Houston – The Woodlands – Sugar Land, Texas
- Nashville, TN – Davidson – Murfreesboro – Franklin
- Philadelphia – Camden – Wilmington, Pennsylvania – New Jersey – Delaware – Maryland
- Portland – South Portland, Maine
- Washington – Arlington – Alexandria, DC – Virginia – Maryland – West Virginia
Inflation remains a wild card
Daniel Hale, chief economist at realtor.com®, said at Tuesday's summit that he is optimistic the housing market will improve in 2024, but that inflation is an issue that could derail optimistic real estate forecasts. He said if inflation does not continue to improve, long-term interest rates could rise, which could deter more homeowners from selling and prolong the bottleneck in market inventory. . Younger homebuyers will continue to suffer from rising housing costs and may remain renters. “That could have a huge impact on the housing market,” Hale said. “Inflation data is very important to watch.”
Although “shelter inflation” continues to rise, overall inflation is easing. Inflation fell to 3.1% in November, according to the latest reading of the consumer price index. (The Fed's inflation target is 2%.) Yun said an “oversupply” of new apartments will hit many housing markets in the coming months, driving down rents and improving inflation control. He said there was a possibility of a connection. He added that he hopes that will reduce the Fed's appetite to continue raising short-term interest rates.
Regardless of inflation or mortgage rates, the housing market in 2024 is likely to remain challenging, especially for first-time buyers who are unable to leverage proceeds from previous home sales, summit panelists said. did. Additionally, with record low inventory, finding a home to buy will be the biggest hurdle. Homeowners remain reluctant to sell and are also reluctant to give up the low mortgage rates they locked in two years ago. Additionally, home builders have been underproducing for decades, with a national shortage of 5 million homes, according to a NAR study.
But today's homeowners are in an enviable position. Due to the rapid rise in housing prices in recent years, owners will be raising their nests in 2024. Even owners in markets that are expected to see a slight decline next year will be able to weather the decline. Home price growth has increased by about 5% in the past year alone. According to NAR data, the typical homeowner has accumulated more than $100,000 in home equity over the past three years. Additionally, comparisons of homeowner and renter assets remain important. According to Federal Reserve data, the typical homeowner has $396,200 in equity, while a renter has $10,400 in equity. “In the long run, homeowners build wealth over time,” Yun says.
