Notes from the field (January 2024)
2023 | Looking Back
2023 was a historic year in real estate. Here are a few of the notable happenings:
The Federal Reserve raised rates to curb inflation, resulting in the least affordable year for housing on record
Mortgage rates ticked higher, passing the 8% mark in October and ending the year at 6.7%
Despite affordability constraints, home prices increased in 2023 (4.8% nationally as of October according to Case-Shiller data)
The number of home sales plummeted to its lowest levels since 2010 during the Great Financial Crisis
Would-be home sellers went on strike, refusing to give up their low mortgage rates (80% of homeowners currently have mortgage rates below 5%; 60% below 4%)
These dynamics created a challenging housing market in 2023. But the worst may be behind us.
In December, the Fed announced it was done raising rates and expected 3 or more rate cuts in the coming year, which should improve the affordability landscape and bring more home sellers into the market.
2024 | Forecast Roundup
With 2023 in the rearview, it's high time we took a look at what housing market experts are predicting for the year ahead. Here's a quick summary of forecasts from the most respected sources in housing.
Zillow | "Zillow economists predict home buyers will have more options and a bit more affordability breathing room — but only a bit — after the inventory crunch and mortgage rates rising to 20-year highs were this year’s headline news items."
Redfin | "Listings will rise and prices and rates will fall. But high housing costs will remain a problem for young families, which will increase demand for large rentals and force President Biden to make affordability a cornerstone of his reelection bid."
Fannie Mae | "Housing has been and continues to be under serious affordability pressure, resulting in recessionary-level home sales activity. While many current owners with low mortgage rates will likely continue to be discouraged from listing their homes, we expect mortgage rates to trend modestly downward in 2024, which should help kickstart a gradual recovery in home sales into 2025." Fannie Mae expects prices to increase 2.8% in 2024.
Realtor.com | "As we look ahead to 2024, we see a mix of continuity and change in both the housing market and economy. Against a backdrop of modest economic growth, slightly higher unemployment, and easing inflation longer-term interest rates including mortgage rates begin a slow retreat. The shift from climbing to falling mortgage rates improves housing affordability, but saps some of the urgency home shoppers had previously sensed." Realtor.com expected prices to fall almost 2% in 2024.
Morgan Stanley | "Next year, Morgan Stanley analysts believe that the U.S. economy will avoid a recession, incomes will continue to rise, mortgage rates will decrease slightly, and U.S. housing activity will pick up a little. Despite lower rates (they expect the 10-year Treasury yield to end 2024 at 3.95%) and a still resilient economy, Morgan Stanley also believes that U.S. home prices will fall by -3% in 2024."
Mortgage Bankers Association | The MBA expects home prices to increase 4.1% in 2024 despite their view that a mild recession will take place this year. "Our forecast is for a mild recession in the first half of 2024, with negative growth in the first half of the year. However, this will be a short-lived, mild recession and a return to trend growth in 2025."
For our part, we're excited about a move toward normalcy in the housing market this year. We think there will be more opportunity for home buyers as rates come down modestly, and we expect to leave behind the volatility we experienced last year.
We know from this past year that buyers react more to changes in rates than the absolute rate levels (in other words, they get used to it). We also know that sellers are usually buyers as well. So we think more people will move forward with whatever plans they had on hold.
If we can help you think about your plans and goals, just hit reply and we'll set up a time to have coffee or hop on the phone. Happy new year and thanks for reading! :)
Best,
Jen and Chad