After several challenging years, the forecast for housing in 2024 is beginning to look better as the outlook for mortgage rates is finally improving.
After hitting a peak of close to 8% in November of 2023, most experts expect mortgage rates to slide into the 6% territory in 2024. While the downward trend in mortgage rates is expected to bring some buyers off the sidelines, the supply of available homes for sale is still expected to remain low. As a result of the continued imbalance between supply and demand, home prices are expected to continue to increase slowly.
While lower rates will boost demand, the continuation of high housing costs will mean that existing homeowners will continue to have a high threshold for deciding to move. Put another way, it is going to take a while before homeowners with sub-5% mortgages are enticed to re-enter the market. That said, supply could improve if mortgage rates drop faster than forecasted enticing more current homeowners to list their property for sale.
Additionally, while new home construction, which rose 17.7% year-over-year in 2023, has helped fill some of the inventory shortfall, the growth in new construction will be limited in 2024 and is forecasted to only increase an estimated 0.4%.
As is the case in any market, moves of necessity, driven by job changes, family situation changes, and downsizing, are likely to drive home sales in 2024.
Additionally, while the housing forecast is optimistic, it hinges on continued moderation of inflation and the decline in mortgage rates, which has been driven by the anticipation that the Federal Reserve, which had raised interest rates 11 times since March of 2022, will begin easing its stance on interest rates by mid-2024.
AFFORDABILITY EXPECTED TO SLOWLY IMPROVE
With mortgage rates decreasing, and wage growth now outpacing inflation, affordability will likely return to the market over time. However, this cycle will be much different than what the market experienced during the financial crisis.
During the great recession, affordability returned after home prices dropped due to an excess supply of homes on the market. Today, with inventory remaining low, home prices have remained stable and there is no sign that prices will drop.
As a result, the return to historical levels of affordability will take an extended period and be driven by sustained wage growth, which has remained strong, and slower home price appreciation.
If you are considering buying or selling in this, or any, market, give me a call at 404-790-1212 and we can discuss your options.
