After a challenging period for the housing market in 2023, real estate experts are predicting a more positive outlook for 2024. According to the National Association of REALTORS® (NAR), existing home sales, which experienced an 18% decline in 2023, are anticipated to rebound. NAR Article.
One major factor contributing to this anticipated improvement is the projected easing of borrowing costs. Mortgage rates, having reached a recent high of nearly 8%, are expected to decline, with NAR predicting a 30-year fixed-rate mortgage averaging around 6.3% in 2024. This decline in rates is likely to enhance housing affordability and attract more buyers to the market.
NAR forecasts a substantial rise in both existing-home sales (projected to increase by 13.5%) and new-home sales (expected to increase by 19%) by the end of 2024. However, certain housing markets may witness more significant growth due to factors such as job growth and housing demand. Among the identified markets with high potential for sales upticks are cities like Austin, Dallas, Nashville, and Washington, D.C.
Despite the positive outlook, there's a wildcard that could affect the market: inflation. If inflation persists and leads to higher interest rates, it might discourage potential sellers, exacerbating inventory shortages and impacting younger homebuyers.
Notably, the housing market is expected to remain challenging for first-time buyers due to record low inventory and hesitant sellers reluctant to give up low mortgage rates. Homebuilders' long-standing underproduction has resulted in a shortage of approximately 5 million housing units nationwide, adding to the market challenges.
However, existing homeowners are set to benefit from the market dynamics. Rapid home appreciation over recent years has significantly increased housing wealth for homeowners, with the typical homeowner accumulating over $100,000 in housing wealth in the past three years alone.
In conclusion, while challenges remain, the housing market anticipates positive changes in 2024. Mortgage rate declines are expected to attract more buyers, but potential hurdles such as inflation and inventory shortages need close monitoring.
