Economists Forecast USA Housing Market Turnaround In 2024
With the outlook for mortgage rates finally improving, the forecast for housing is looking better heading into the New Year. Realtor.com economists predict that mortgage rates, which have declined over the past five weeks, will slide into the 6% territory in 2024. Fannie Mae expects mortgage rates to decline gradually over the next two years, reaching 6.9% for the 30-year mortgage by 2025. At the same time, First American economists noted that mortgage rates will hover in the 6.5% to 7.5% range. That's good news for the market that recently saw mortgage rates climb close to 8%, but the dip won't be enough to entice existing homeowners with sub-5% mortgages back into the fray. This will continue to complicate supply availability and will remain a challenge as the market heads into the New Year, according to Realtor.com Chief Economist Danielle Hale. With mortgage rates finally decreasing, affordability will likely return to the market, enticing some buyers back. Next year, the typical monthly purchase cost for the median-priced home listing is expected to be slightly less than $2,200 monthly, down from $2,240 this year, according to Realtor.com. Existing supply availability could improve if mortgage rates drop faster than forecasted, according to Hale. However, the lack of existing housing supply has been tempered by the uptick in new home builds, which is expected to continue into 2024. Single-family home housing starts are forecasted to increase an estimated 0.4% in 2024, according to Realtor.com. The latest figures on new home sales reported by the U.S. Department of Housing and Urban Development and the Census Bureau show that New home sales rose 17.7% year-over-year. In October 2023, new home sales were at a seasonally adjusted annual rate of 679,000. This is 5.6% below the revised September rate of 719,000 but is above the October 2022 estimate of 577,000. The forecast for housing is optimistic but hinges on continued moderation of inflation and that the Federal Reserve will begin easing its stance on interest rates. If inflation were to see a resurgence instead, home sales could slip lower instead of steadying, according to Hale. The Fed has raised interest rates 11 times since March of last year, pushing the federal funds rate to a 22-year high of 5.25% to 5.5% to slow the economy and lower soaring inflation. In October, inflation rose 3.2%, down from 3.7% growth last month – evidence that rising prices are moderating. However, in a recent statement Fed Chair Jerome Powell said that it is too soon to say that the Fed is done with rate increases confidently.
Tags : Realtor.com economists Urban Development affordability mortgage rates U.S. Department of Housing Urban Development