Will Home Buying Surge in 2024?

Great Expectations

Real estate industry experts predict a strong year for buying activity, as mortgage rates are expected to come down over the course of the year. But there may be some hurdles in the way.

In December, the National Association of Realtors® (NAR) said they anticipated 4.7 million existing home sales in 2024, up 13.5% from the prior year. However, a hotter-than-expected February inflation report complicated matters by pushing back expectations for Federal Reserve interest rate cuts. The Fed raised rates to combat high inflation, but has voiced concerns about lowering rates too quickly. This has a knock-on effect on mortgage rates as well, potentially keeping them from dropping as quickly as prospective homebuyers might desire.

The average 30-year mortgage rate continues to hover around 7%.

Looking for Relief in House Prices

The anticipated 2024 real estate boom was never dependent on lower average home prices. But even if house price tags aren’t heading down, at least it doesn’t look like they will spike much higher.

NAR Chief Economist Lawrence Yun said the median home price should reach $389,500 this year — an increase of only 0.9% from 2023.

Reading the Tea Leaves

Even as inflation worries linger, there is reason for optimism. The Fed is still expected to cut rates multiple times this year, which should bring mortgage rates down eventually.

The missing piece is inventory.

The housing market can only take off if more supply becomes available, even if mortgage rates come down.

On that front, the Commerce Department reported last month that permits for future construction of single-family housing increased to their highest level since May 2022. Another indicator: In December 2023, housing starts were at 1.46 million, up from 1.358 million one year earlier.

Finally, mortgage rates also factor into the inventory question, as people with existing mortgages might wait for lower rates to put their homes on the market and purchase a new one. Some observers say they expect it. According to the NAR report, in 2024, NAR expects housing inventory to rise by around 30% “as more sellers begin to list after delaying selling over the past two years.”

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