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The housing market in 2023 was heavily influenced by the “mortgage rate lock-in effect,” which led 85% of mortgage holders to refrain from selling or buying due to the potential higher interest rates. However, the recent decline in mortgage rates, averaging 6.61% for a 30-year fixed mortgage by the end of December 28, contributed to a growth in existing home sales in November, breaking the five-month decline streak.
Despite this positive development, experts predict a continued shortage of homes for sale in 2024. To address this issue, Danielle Hale, Chief Economist for Realtor.com, suggests a small increase in single-family home construction and the completion of numerous multifamily units to provide more options and curb price increases.
While nationwide sales are expected to see a modest uptick in 2024, real estate activity will vary across markets. Affordable Midwest and Northeast markets, along with Southern California, are predicted to experience double-digit increases. The median existing home price in November 2023 was $387,600, marking a 4% increase from the previous year.
Regarding mortgage rates, experts anticipate rates to hover between 6.1% to 7% in the first quarter of 2024, gradually declining throughout the year. However, election year volatility may impact rates, but a decrease is expected, providing relief to homebuyers.
Robert Dietz, the Chief Economist for the National Association of Home Builders, forecasts an increase in single-family housing construction starts in 2024, the first after declines in 2022 and 2023. New construction has risen to about one-third of total single-family inventory due to low existing inventory.
Multifamily construction is expected to decline due to tight financing conditions, with around one million apartments under construction, the highest since 1973. Remodeling activity is anticipated to remain flat in 2024, reflecting the aging housing stock, which requires reinvestment.
Source: Housing market predictions
