The real estate market remains strong, bolstered by the recent drop of mortgage rates. Home prices are expected to continue their upward trajectory in 2024, with most markets reaching new price highs.
Insights
It appears that mortgage rates are now falling again. They will almost certainly not fall to pandemic lows, although we may soon see rates under 6.0 percent, which would be low by pre-Great Recession standards.
Dean Baker, Senior Economist, Center for Economic Research
We now forecast three consecutive 25bp cuts in March, May, and June to reset the policy rate from a level that Powell has recently taken to describing as “well into restrictive territory” rather than just “restrictive”.
Goldman Sachs, December FOMC Recap
Forecasts
The real estate market is projected to experience strong demand in early 2024, driven by dropping mortgage rates. This trend is expected to put pressure on home prices, with most markets reaching new price highs throughout the year. Forecasts from various sources, including CoreLogic, Case-Shiller Index, and Realtor.com, indicate an increase in home prices and a recovery of losses recorded in the previous year.
Rates
With rates dropping, the demand for homes is expected to be strong in 2024. The 30-year fixed mortgage rates have shown a downward trend, aligning with the decrease in the 10-year Treasury yield. This presents an opportunity for potential homebuyers to secure favorable financing for their home purchase. According to Freddie Mac, rates were just 6.61% as of 12/28/23 and are expected to drop further this year.
Affordability
Affordability in the real estate market is influenced by mortgage rates and home prices. The current drop in mortgage rates presents an opportunity for buyers to secure more affordable financing options. However, the pressure on home prices may impact affordability in certain markets.
Inventory
According to National Association of Realtors (NAR), the average days on market for November 2023 was 25 days and there are 3.5 months of housing inventory available. The months’ inventory of homes for sale has shown a downward trend since 2019, indicating a tightening supply and causing increased competition amongst buyers.
Prices
Home prices are expected to continue their upward trajectory in 2024, with most markets reaching new price highs. The CoreLogic S&P Case-Shiller Index indicates an increase of approximately 7% since the beginning of 2023, recovering all losses recorded in the previous year. According to the HPES, if you purchase a $400K home in January 2024, you can expect $72,405 in potential growth of household wealth over the next 5 years.
Sales
The real estate market has witnessed fluctuations in home sales, influenced by factors such as mortgage rates, inventory levels, and buyer demand.
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