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After two years of sharp declines, existing-home sales are poised for improvement in 2024. But first, this slice of the housing market must weather the rest of a rocky year in 2023, with existing-home sales expected to end up 18% lower than those of 2022, according to the National Association of REALTORS®. That puts these transactions on track for their worst year in more than a decade.
NAR Chief Economist Lawrence Yun joined other leading housing analysts Tuesday at NAR’s virtual Real Estate Forecast Summit to discuss sales projections heading into 2024—and the experts agreed that better days are ahead for the real estate market.
Mortgage rates likely have peaked and are now falling from their recent high of nearly 8%. NAR predicts the 30-year fixed-rate mortgage to average 6.3% in 2024; realtor.com® projects 6.5%. This likely will improve housing affordability and entice more home buyers to return to the market, Yun says. NAR’s data shows that rates near 6.6% enable the average American family to afford a median-priced home without devoting more than 30% of their income to housing, the threshold commonly used to measure affordability.
NAR is projecting that existing-home sales will rise 13.5% and new-home sales—which are up about 5% this year, defying market trends—could increase another 19% by the end of next year.
Markets to Watch in 2024
Some housing markets likely will experience higher sales upticks in 2024 than others. “Job growth will be a determinant for long-term housing demand,” Yun said.
NAR evaluated 100 of the largest U.S. metro areas to identify the markets with the largest pool of potential home buyers, the greatest likelihood for home price appreciation and more. The following markets have the most pent-up housing demand for 2024, according to NAR:
- Austin-Round Rock-Georgetown, Texas
- Dallas-Fort Worth-Arlington, Texas
- Dayton-Kettering, Ohio
- Durham-Chapel Hill, N.C.
- Harrisburg-Carlisle, Pa.
- Houston-The Woodlands-Sugar Land, Texas
- Nashville-Davidson–Murfreesboro–Franklin, Tenn.
- Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.
- Portland-South Portland, Maine
- Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.
Inflation Remains a Wild Card
Danielle Hale, chief economist at realtor.com®, said at Tuesday’s summit that while she’s optimistic the housing market will improve in 2024, inflation is the issue that could derail optimistic real estate forecasts. If inflation doesn’t continue to improve, she said, it could raise long-term interest rates, which then could discourage more homeowners from selling and prolong the inventory bottlenecks in the market. Younger generations of home buyers may continue to be sidelined by higher housing costs and remain as renters. “That could have huge ramifications for the housing market,” Hale said. “The inflation data is very important to watch.”
Overall inflation has been easing, although “shelter inflation” continues to rise. The latest reading of the Consumer Price Index showed that inflation decreased to 3.1% in November. (The Federal Reserve’s target for the inflation rate is 2%.) Yun said an “oversupply” of new apartment units will hit many housing markets in the coming months, which could bring rental rates down and help better control inflation. Hopefully, he added, that will disincentivize the Fed to continue raising its short-term rates.
Regardless of inflation and mortgage rates, the 2024 housing market likely will remain challenging, particularly for first-time buyers who are unable to leverage the proceeds from a previous home sale, summit panelists noted. Plus, amid record low inventory, finding a home to buy will be a top hurdle. Homeowners remain reluctant to sell and give up the low mortgage rates they locked in two years ago. Further, homebuilders have underproduced for decades, leading to a shortage of 5 million housing units nationwide, according to NAR research.
However, current homeowners are in an envious position: With rapid home appreciation in recent years, owners will grow their nest egg in 2024. Even those in markets that are expecting slight dips next year will be able to weather the drop. Home price appreciation has jumped by about 5% over the past year alone. The typical homeowner has accumulated more than $100,000 in housing wealth over the past three years, NAR’s data shows. Plus, the wealth comparison between homeowners and renters continues to be significant: The typical homeowner has $396,200 in wealth versus $10,400 for renters, according to Federal Reserve data. “Over the long term, homeowners build wealth over time,” Yun said.
