Economists predict the real estate market will recover in 2024 after sales fell to a 28-year low in 2023 due to high mortgage rates and a shortage of properties.
Home sales are likely to increase 14% this year, said Lawrence Yun, chief economist at the National Association of Realtors. This would be the largest annual gain in more than 40 years, according to NAR data.
Lower mortgage rates in 2024 (NAR expects the average to be 6.3% by the fourth quarter, down from 7.8% in the final three months of 2023) will allow more owners to take advantage of the pandemic. It will encourage them to give up the ultra-low interest rates they got and repay their loans. Yun said the home is on the market. This will increase the inventory of real estate for sale by about 30% from its record low in 2023, he said.
“There is pent-up demand among sellers that will be released as interest rates come down,” Yun said in an interview. “Families with a new baby, new marriage or divorce are all waiting for interest rates to fall so they can move into a system that better suits them.”
Economists at Wells Fargo have a more optimistic outlook than the NAR, predicting the average 30-year fixed rate will fall to 6% by the end of 2024, close to the Mortgage Bankers Association’s forecast of 6.1%. . Fannie Mae, the largest mortgage lender, has the least optimistic outlook of the major forecasters, with the average expecting it to reach 6.5% by the end of the year.
These interest rates are far from the historic lows of 2020 and 2021, when people were able to buy homes or refinance mortgages at interest rates in the 2s and 3s, but the Federal Reserve The sharp rise to the low 7s made Fannie Mae economists last month more palatable for rates in the 6s as the economy battles inflation.
“Homebuyers now appear to be more accustomed to higher mortgage rates than they were in 2022,” the economists said in a statement.
The average interest rate on a 30-year fixed mortgage in the U.S. this week was 6.62%, up slightly from 6.61% last week but more than a percentage point lower than the 7.79% recorded in the last week of October, according to Freddie Mac. .
NAR’s Yun predicted that home prices will continue to rise in 2024, hitting a new record high. He said the median home price is likely to reach $389,500, an increase of 0.9% from 2023.
“In 2024, housing demand will increase as mortgage interest rates are expected to fall and incomes will rise,” Yun said.
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