California housing market will rebound in 2024 as mortgage rates ebb
- Existing, single-family home sales are forecast to total 327,100 units in 2024, an increase of 22.9 percent from 2023’s projected pace of 266,200.
- California’s median home price is forecast to climb 6.2 percent to $860,300 in 2024, following a projected 1.5 percent decrease to $810,000 in 2023 from 2022’s $822,300.
- Housing affordability* is expected to remain flat at 17 percent next year from a projected 17 percent in 2023.
LOS ANGELES (September 20) – Anticipated deceleration in economic growth and the abating inflationary pressures will lead to a reduction in mortgage interest rates during 2024. This shift is expected to create a more favorable market environment, catalyzing California's home sales next year, as per a housing and economic forecast unveiled today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
C.A.R.'s "2024 California Housing Market Forecast" baseline scenario envisions a robust 22.9 percent increase in existing single-family home sales in the coming year, projecting 327,100 units sold, compared to the estimated 266,200 sales for 2023. The 2023 figures indicate a 22.2 percent dip from the brisk pace of 342,000 homes sold in 2022.
The forecast further predicts a 6.2 percent uptick in the California median home price to $860,300 for 2024, following a 1.5 percent dip to $810,000 in 2023 from the 2022 figure of $822,300. Despite this, a persistent housing shortage and a competitive market will continue to exert upward pressure on home prices next year.
Jennifer Branchini, C.A.R. President and a Bay Area REALTOR®, noted, "2024 promises to be a more favorable year for the California housing market, benefiting both buyers and sellers. The expected decline in mortgage interest rates will create a conducive market environment with reduced borrowing costs. This, along with an increase in available homes for sale, will motivate prospective buyers and sellers to reenter the market. First-time buyers, who were squeezed out by the highly competitive market in recent years, will endeavor to realize their American dream. Additionally, repeat buyers, having overcome the 'lock-in effect,' will return to the market as mortgage rates start trending downward."
C.A.R.'s 2024 forecast projects a 0.7 percent increase in the U.S. gross domestic product for 2024, following a projected uptick of 1.7 percent in 2023. California's nonfarm job growth rate for 2024 is anticipated at 0.5 percent, up from a projected increase of 1.4 percent in 2023. Consequently, the state's unemployment rate is forecast to rise to 5.0 percent in 2024 from the projected 4.6 percent in 2023.
Inflation is projected to gradually decline over the next 18 months, with the Consumer Price Index registering 2.6% in 2024, down from 3.9% in 2023. Consequently, the average 30-year fixed mortgage interest rate will decrease from 6.7 percent in 2023, although it will remain relatively elevated at 6.0 percent in 2024. While the projected average for the 30-year fixed mortgage interest rate in the upcoming year will still be higher than the levels observed in the years prior to the pandemic, it will be lower than the long-term average of nearly 8% over the past five decades.
Despite a projected increase in active listings of 10 to 20 percent, housing supply in 2024 is expected to remain below the norm. This is due to the prevailing market conditions and the evolving lending environment.
C.A.R.'s Senior Vice President and Chief Economist, Jordan Levine, commented, "With the economy anticipated to soften in 2024, the Federal Reserve Bank will commence loosening its monetary policy in the coming year. Consequently, mortgage rates are expected to trend downward throughout 2024, with the average 30-year fixed-rate mortgage possibly reaching the mid-5% range by the end of the year. This should provide buyers with greater financial flexibility to purchase homes at higher prices, potentially driving increased housing demand and exerting upward pressure on home prices."
Source: California Association of Realtors (www.car.org)