Every real estate professional knows that 2023 has been a challenging year for the housing market, with consumers facing many hurdles to homeownership. As the year winds down, the National Association of REALTORS® (NAR) is looking back at where we’ve been over the last 12 months and where we’re likely to go in 2024 to help our members prepare for challenges and take advantage of opportunities ahead.
2023 in review
According to NAR Chief Economist Lawrence Yun, “This year has been especially tough for REALTORS®, members of the National Association of REALTORS®, because home sales transactions have been running about 20% lower than a year ago. What’s worse is that this is on top of an 18% decline in 2022, so real estate professionals have seen two consecutive years of near 20% declines.”
What’s causing this dramatic slump in sales? Two major culprits that NAR members are well aware of: rising mortgage rates and low inventory. Mortgage rates have more than doubled since early 2021, reaching a 20-year high in 2023, while prices have risen. Even for those with the financial capacity to purchase a home, lack of inventory limits options and hinders transactions.
“However, there is an interesting development occurring in the background,” notes Yun. “Sales of newly constructed homes are up 5% as compared to a year ago. Despite facing the same high-interest rates, homebuilders have been able to generate inventory and elevate sup- ply, resulting in new construction representing a larger share of home sales in 2023 than the typical 10%.
“For current homeowners, one bright spot has been the resilience of home prices,” adds Yun. “So even though agents and brokers are hurting, their clients are happy knowing that their home value has likely increased and that prices have been stable even during a sales slump.”
Economic forecasts are always subject to uncertainty, Yun points out, but here’s his assessment of how some key market factors will play out in 2024:
Mortgage rates are currently topping out, and the Federal Reserve will begin to pivot with a good possibility that interest rates will be lowered into the 6% range.
More inventory will become available because, although homeowners have been reluctant to move and give up their 3% – 4% interest rate, millions of life-changing events such as marriage, divorce, birth, death or job switches will necessitate housing changes. People can’t postpone moving indefinitely, so even a small fall in rates could be the enticement owners need to put their home on the market. Builders will also continue to increase inventory.
As mortgage rates decrease and inventory increases, a rise in home sales of about 13% is anticipated in 2024, along with another year of stable pricing.
“In essence, the real estate market is poised for an uptick of both buyers and sellers in 2024,” says Yun. “We’ll start to bridge the gap between supply and demand and bring about a more dynamic and balanced marketplace.”
NAR research and statistics
NAR produces and analyzes a wide range of real estate data that can help you understand market behavior and prepare for whatever 2024 has in store. Position your brokerage for growth by leveraging the NAR research team’s monthly Research Update, which gathers the latest housing indicators, such as the Housing Affordability Index, Pending and Existing Home Sales Snapshots, REALTORS® Confidence Index and much more.
Visit https://www.nar.realtor/research-and-statistics for the latest housing research, statistics and news.