During the group's annual Reimagine! Conference & Expo held in Anaheim on Sept. 19-21, Jordan Levine, senior vice president and chief economist of the association, said slower economic growth and cooling inflation will bring down mortgage interest rates, which will spur home sales and create a better housing market for both buyers and sellers.
The association, he said, predicts the U.S. gross domestic product (the sum of all goods and services produced within a nation's borders) to grow by 0.7% in 2024, after a projected uptick of 1.7% for 2023. (The ideal growth rate is between 2% and 3%, according to economists who use the GDP to measure the country's economic health.)
Levine noted the following current market strengths: Home prices are rising, the market is not crashing, the economy continues to expand, and homeownership is still desired and valued by Americans, he said. Among current market challenges, he said, are housing affordability, a decline in homeownership and interest rates that are expected to remain elevated.
Inflation and interest rates
Levine indicated that inflation will continue its gradual decline over the next 18 months. The rate of inflation is expected to drop from 3.9% this year to 2.6% in 2024, according to the Consumer Price Index used to measure the average change of prices over time.
The average 30-year, fixed mortgage interest rate is expected to see a slight decline to 6%. It will still be higher than levels seen in the years prior to the pandemic.
“With the economy expected to soften in 2024, the Federal Reserve Bank will begin loosening its monetary policy next year. Mortgage rates will trend down throughout 2024, and the average 30-year, fixed-rate mortgage could reach the mid-5% range by the end of next year,” Levine said. “Buyers will have more financial flexibility to purchase homes at higher prices, which could generate increased housing demand and result in more upward pressure on home prices.”
Home sales and prices
The California Association of Realtors is projecting single-family home sales to increase by 22.9% next year with the sale of 327,100 homes statewide. That's up from the projected sales volume of 266,200 homes for 2023 and lower than 2022, which saw 342,000 homes sold.
The association also forecasts California's median home price to reach $860,300, a 6.2% increase from 2023's projected annual median home price of $810,000. In 2022, the median home price was $822,300.
The state’s median home price rose to a 15-month high in August when it reached $859,800, the highest since it peaked at $893,200 in May 2022. The most expensive median home prices in August were located in the Silicon Valley counties of San Mateo and Santa Clara.
The association indicated Santa Clara County’s median price for a single-family home in August shot up to $1.85 million, a 12.3% increase compared to the median price of $1.65 million during the same time in 2022 and 2.9% more than the previous month's median price of $1.8 million in July. In San Mateo County, the August median home price of $1.95 million was the same compared to August 2022 and slightly lower than the previous month's median price of $1.98 million in July.
“The market was especially strong in August in Santa Clara County, where according to MLS data the year-over-year median price in many cities increased in double-digit percentages. Homebuyers are still paying over asking,” said Jim Hamilton, president of the Silicon Valley Association of Realtors.
Hamilton said the Federal Reserve's decision not to raise the interest rate in September has allayed concerns that more interest hikes could bring a recession.
“The hope is that the Fed will stop raising interest rates. This will put more homebuyers and sellers at ease,” said Hamilton.
“A more favorable market environment with lower borrowing costs, coupled with an increase in available homes for sale, will motivate buyers and sellers to reenter the market next year,” Jennifer Branchini, president of the California Association of Realtors, said. “First-time buyers who were squeezed out by the highly competitive market in the last couple of years will try to attain their American dream next year."
She also believes that more homeowners will start to feel less "locked in" to staying in their homes due to significant cost increases in moving associated with growing interest rates.
"Repeat buyers who have overcome the ‘lock-in effect’ also will return to the market as mortgage rates begin to trend down," she said.
Silicon Valley Association of Realtors (SILVAR) is a professional trade organization representing 5,000 Realtors and affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term Realtor is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of Realtors and who subscribes to its strict Code of Ethics.
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