Economist Predicts a Brighter Outlook for Homebuyers in 2024
As the U.S. residential real estate market faces elevated mortgage rates, high home prices, and limited housing inventory, the dream of homeownership is becoming more difficult for many Americans. However, according to Lawrence Yun, chief economist for the National Association of Realtors, there may be a silver lining on the horizon for prospective homebuyers in 2024.
Current State of the U.S. Residential Real Estate Market
During the Residential Economic Issues and Trends Forum at the association’s annual NAR NXT, The Realtor Experience conference, Yun analyzed the current state of the U.S. residential real estate market and explained that high mortgage rates and low housing inventory have been the primary challenges in 2023. He stated that “Twenty-year-high mortgage rates have held off homebuyers. There’s also a lack of housing inventory to sell, which means fewer opportunities for sales in the marketplace.”
Signs of Improvement: Inflation Cooling and Lower Mortgage Rates
Despite these challenges, there is some good news. Recent data from the U.S. Bureau of Labor Statistics showed that inflation has cooled more than expected, with the Consumer Price Index rising 3.2% for the 12 months that ended in October, down from 3.7% in September. This marks the lowest annual rate in the past two years.
As inflation gradually declines, Yun predicts that the Federal Reserve will adjust its monetary tightening posture. He forecasts that mortgage rates, which have reached as high as 8% this year, will drop to between 6-7% by the spring buying season. This could encourage more sellers to enter the market and alleviate some of the pressures caused by low housing inventory.
Challenges for First-Time Homebuyers
Yun highlighted that the lack of housing inventory has been a significant factor in driving up home prices, making it particularly difficult for first-time buyers. The association’s newly released “2023 Profile of Home Buyers and Sellers” annual survey revealed that first-time buyers made up 32% of all homebuyers, up from last year’s historic low of 26%. However, this is still well below the 38% annual average recorded since 1981.
Furthermore, the survey indicated that the national median household income for typical homebuyers jumped to $107,000, up from $88,000 the previous year. Notably, today’s first-time buyers had household incomes nearly $25,000 above last year’s, underscoring the increasing income required to purchase a home.
Pent-up Seller Activity and a Brighter Future
Yun noted that new housing construction and numerous trends point to possible pent-up seller activity, which could trigger more houses to become available on the market. As sellers are unable to delay moving much longer due to life changes, such as growing families, couples marrying or divorcing, and seniors downsizing or relocating, more houses may become available for sale.
Yun forecasts that existing home sales will rise by 15% next year, as “People will begin to say, ‘life goes on.’ Listings will steadily show up, and new home sales will continue to do well.”
Conclusion: A Promising Outlook for Homebuyers in 2024
While the current state of the U.S. residential real estate market presents significant challenges for prospective homebuyers, there is hope for a brighter outlook in 2024. With inflation cooling and the potential for lower mortgage rates, the market may see an increase in sellers and housing inventory. This could create more opportunities for first-time buyers and ultimately lead to a healthier, more balanced market in the coming year.
Orginal article: Link To Article – provided by Kansas City Realtors
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