2024 could usher in a surge of home sales
NAR economist expects to see a double-digit rise in both existing and new home sales next year.
Key points:
- Lawrence Yun, chief economist at NAR, predicts existing sales will rise 13% while new home sales will jump 19% next year.
- Yun’s prediction assumes that mortgage interest rates will drop into the 6% range in time for the spring homebuying season, spurring buyer demand.
- Life events like job changes and marriage are also expected to put pressure on sellers locked into low interest rates.
ANAHEIM, Calif. — After two years of lackluster home sales, the chief economist for the National Association of Realtors is eyeing a big bounceback in 2024.
Speaking at the NAR NXT conference on Tuesday, Nov. 14, Lawrence Yun said he believes lower inflation numbers will push down mortgage interest rates, leading to a boost in home sales. On a national level, Yun expects new home sales to rise 19% in 2024 while existing home sales increase by 13%.
Even at that pace, sales would still be well below 2021 levels following the big declines of the past two years, Yun acknowledged. Existing home sales fell 17% in 2022 and are expected to drop by 18% in 2023.
Mortgage rates could fall to 6% by spring
But a rebound in 2024 would still be welcome news. Yun based his forecast on two main factors: Inflation that continues to decline as lagging rent data catches up, causing the 30-year mortgage rate to settle in the 6% range in time for the spring homebuying season; and pent up demand that will be released as rates fall and homeowners with locked-in low interest rates need to sell and buy homes because of life events.
"We all know what happens when the mortgage rate drops — there are more buyers," Yun said. "What will be unique this time around is I think we will also have more sellers in the market," he added.
Economic issues remain a wildcard
The forecast comes amid "worrying" signs in the economy, Yun noted. Elevated interest rates have impacted not just mortgages but also credit card rates, which could continue to chip away at consumer spending, a main driver in the current strength of the economy.
A decline in spending, combined with a weakening job market, could still lead to a recession if current trends continue, Yun said. While that would be bad news for the overall economy, it would put pressure on the Federal Reserve to cut interest rates sooner.
The latest data on inflation, which dropped slightly to 3.2% in October, is an encouraging sign, Yun said. Bond markets are reacting to the data as though rate hikes are over and cuts could be coming sooner.
Some economists, however, take a more cautious view. Lisa Sturtevant, chief economist at Bright MLS, believes that the small drop in inflation is an indication that it's getting harder to hit the 2% target.
"The longer inflation stays elevated, the more consumers expect inflation to remain high," Sturtevant said in response to the latest inflation data. "And if consumers reset their expectations for inflation to be at 3% or 3.5%, it will be harder and harder for the Fed to bring inflation down."