2024 Real Estate Forecast

After reaching a record peak in May 2022, home values dropped through December, seven straight months of dropping prices. Yet, the inventory of available homes sank to start the year as rates dropped from their end-of-the-year 2022 highs. Home affordability improved slightly as the scarcity of homes available dropped to problematic, low levels, especially in the lower price ranges. The muted supply overshadowed the affordability predicament, and home values rose throughout 2023, surpassing the May 2022 height. The Federal Reserve raised the Federal Funds Rate from 0 to 4.5% in 2022 and hiked it to 5.5% in 2023. Inflation eased from 6.4% in December 2022 to 3.1% in November 2023. Inflation is trending down, and at this point, the Federal Funds Rate appears too restrictive; thus, the FED indicates that the rate will need to be cut several times in 2024, or they risk slowing the economy too much and potentially causing a recession. Thus far, the United States economy has been resilient, backed by a very strong labor market, sky-high job openings, low unemployment, and increasing consumer spending. Yet, storm clouds are gathering as consumer savings rates are at their lowest levels since 2009, excess savings from pandemic stimulus checks are running dry, and credit card debt has risen sharply. As a result, the economy is poised to cool. Mortgage rates drop with a subdued economy. This will result in a hotter housing market. When will housing heat up next year? It depends on when the economy cools. The forecast has three different scenarios: it cools during the spring, summer, or fall. For the sake of this article, we will focus on Scenario 1, with the highest probability for cooling.

Scenario 1

50% Chance The Economy Cools During the Spring

    Interest Rates

Look for mortgage rates to drop to between 6% and 6.5% when the economy cools and inflation continues to ease. As the U.S. economy weakens yet does not slip into a deep recession, expect rates to fall below 5% during the year’s second half.

  Active Inventory

After starting the year with less than 1,700 homes, the second lowest start to a year since tracking began in 2004, only behind 2022, the inventory crisis will continue. It will reach a low peak of only 2,500 homes during the summer, well below the over 7,000 home peak average before COVID. As mortgage rates improve, the “Hunkering Down” effect, where homeowners opt to stay in their homes due to their underlying fixed low mortgage rates, will diminish. More homes will enter the fray starting in the spring.

  Demand

Buyer demand will pick up substantially during the Spring Market. As rates remain below 6.5% with duration, the housing market will heat up, similar to the COVID years between 2020 and the first half of 2022, due to increased affordability. Multiple offers and bidding wars will prevail and buyers will be willing to stretch in price to secure a home.     

Closed Sales

The number of successful closed sales will increase by 16% to 23% compared to 2022, with around 24,000 total.

Home Values

Home values will rise between 4% to 7% for the year.

Additionally, the housing market will follow a typical housing cycle. Spring is the strongest in terms of demand, followed by the Summer Market, then the Autumn Market, and finally the Holiday Market. Luxury housing will be sluggish and will continue to transition to normal, longer market times, often taking months to procure a sale. The Spring Market will be the strongest for luxury and become sluggish and susceptible to Wall Street volatility during the year’s second half. Finally, do not expect a wave of foreclosures and short sales. Distressed properties are still far below pre-pandemic levels, and homeowners are sitting on mountains of equity.

The bottom line is that the economy will cool sometime in 2024. When that occurs, rates will drop, and the housing market will heat up. No matter what, there will be more homeowners opting to sell their homes, pending sales will increase and surpass 2023 levels, and there will be more closed sales. How hot the housing market gets in 2024 depends upon when the overall economy downshifts.

Who is The Prestige Team?

Rancho Palos Verdes Realtor Broker Associate Karen Anderson, along with her Real Estate Team, The Prestige Team, has been selling residential real estate in the South Bay, including Rancho Palos Verdes, San Pedro, and far beyond LA County for over 27 years and is ranked in the top 1% of realtors in Rancho Palos Verdes.  We specialize in transforming homes into impeccably presented real estate listings that command top dollar in the shortest amount of time!  

Learn more about us below!

Before After

For our Buyers:

Added Benefits When Working With Us

Contract Knowledge

The Residential Purchase Agreement is 10 pages of terms and conditions that stipulate every aspect of the purchase, and we know exactly how to use them to your complete advantage!

Expert Negotiators

As experienced Full-Service Realtors, we know how to leverage you buying and bargain power. Whether competing to get your offer accepted or negotiating repairs, our goal is to get you a great deal!

Team = Always Available

The added benefit of working with The Prestige Team is that one of our Real Estate Professionals is always available to help. No missed opportunities!

On Every Listing:

Need Additional Assistance? We Specialize in that!

Decluttering & Emptying Properties

Need help with decluttering? Whether you need a few boxes and an extra set of hands, have a house full of items that need to go, we have the resources in place ready to assist with your needs!

Schedule Management

Schedule Management is crucial if you have a time frame in mind for the sale of your home. Let us use our experience to ensure every aspect of preparing your home for the market stays on schedule!

Team = Always Available

The added benefit of working with The Prestige Team is that one of our Real Estate Professionals is always available to help. No missed opportunities!

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