NAR Forecasts 4.71 Million Existing-Home Sales in 2024, With Mortgage Rates in Mid-6% Range

When an 18% decline in home sales in 2022 is followed by what looks like another 18% drop this year, it’s hard to put a positive spin on the residential real estate market going forward, but Dr. Lawrence Yun, chief economist for the National Association of REALTORS® (NAR), did just that on Dec. 12 at NAR’s annual virtual Real Estate Forecast Summit: The Year Ahead.

Yun predicted affordability to start improving in 2024, with a slight softening of home prices, hopefully making it easier for first-time homebuyers to enter the market. He anticipates mortgage rates to decline further as well. But he cautioned that it has become more and more difficult for first-timers to buy a house at all, forcing them to remain in the rental market. And he acknowledged that there is still a major inventory issue in the U.S.

“America is still facing a housing shortage,” he stated. “It is due to the cumulative decade of underproduction, despite the fact that builders have done better recently compared to five or seven years ago.”

Nevertheless, Yun forecasts that 4.71 million existing homes will be sold next year, with Austin, Texas, the top real estate market to watch in 2024 and beyond. He predicts home sales will begin to rise next year by 13.5% compared to 2023, and the median home price will reach $389,500, an increase of 0.9% from this year.

“The demand for housing will recover from falling mortgage rates and rising income,” Yun said. “In addition, housing inventory is expected to rise by around 30% as more sellers begin to list after delaying selling over the past two years. The top 10 U.S. markets will experience faster recovery in home sales.

“Metro markets in Southern states will likely outperform others due to faster job increases, while markets in the Midwest will experience gains from being in the most affordable region.”

Yun forecasts that U.S. GDP will grow by 1.5%, avoiding a recession, with net new job additions slowing to 1.7 million in 2024 compared to 2.7 million in 2023 and 4.8 million in 2022. After eclipsing 8% in late 2023, he expects the 30-year fixed mortgage rate to average 6.3%, and that the Fed will cut rates four times, calming inflationary conditions, in response to slower economic activity.

Yun also foresees 1.48 million housing starts in 2024, including 1.04 million single-family and 440,000 multifamily.

Yun expects rent prices to retreat further in 2024, holding down the consumer price index. He predicts foreclosure rates will stay at historically low levels in 2024, comprising less than 1% of all mortgages.

He then touched on a topic that had not been relevant before the recent Burnett vs. NAR federal class action trial that resulted in buyer agents and brokerages having to rethink their commission strategies, and homebuyers potentially having to pay buyer agents upfront to represent them.

“If we were to ask first-time buyers to now pay for the buyer representation, you can imagine how many would struggle to come up with the additional cash,” he said. “Maybe they would need to borrow that amount, or they would have to (represent) themselves. But if they do it by themselves, then they face challenges.

“Finding the right property, understanding the process, the paperwork. First-time buyers could be in a jam or could get taken advantage of by sellers. So it’s a difficult situation that the first-time buyer may be facing in the upcoming year under the current system.”

During the same NAR Summit, Danielle Hale, chief economist at realtor.com®, predicted a softening of home prices in 2024, making it easier for buyers who might have been unable to purchase a home in 2023.

“There is going to be a bright spot for buyers in 2024, many of whom are probably worn out from the persistent theme of a lack of affordability that we’ve seen in the housing market,” she said. “I expect affordability to start to improve. We’re not going to see a big turnaround, but I do think we’re going to see a baby step in the right direction.

“We expect that home prices are going to soften a little bit. Not enough to wipe out the significant equity gains that existing homeowners have, but perhaps enough to make it a little bit easier for buyers to get into the housing market, especially first-time buyers who haven’t benefited from the equity buildup that existing homeowners have as home prices have gone up significantly over the last couple of years.”

Hale agreed with Yun that mortgage rates should also become more palatable to buyers going forward.

“We expect to see rates at about 6.5% at the end of 2024, and to average about 6.8% for the calendar year as a whole,” she expressed. “That will actually be roughly on par with where mortgage rates have averaged in 2023, but almost the mirror image. So instead of starting low and increasing throughout the year, as we saw in 2023, as there was this reassessment of how long the Fed was going to need to keep its policy rate elevated, we think as we look ahead into 2024 that we will see inflation continue to come in on target.”

NAR identified the following markets with the most pent-up demand to outperform other metro areas in 2024: