Mortgage rates dropped to 6.64% by December 21, the lowest since May, dropping from a high of 8% in October. New listings are up 9% from last year, the biggest increase since July 2021. This is partly because new listings were low this time last year.
Supply months increased by 0.2 points to 4 months compared to last year. Active listings decreased by -4.5% YoY, the smallest drop since June.
The current drop in mortgage rates, increased new listings and inventory, and a rise in housing starts suggest the housing market is improving in 2023. However, high mortgage rates, home prices, and low housing stock still make it hard for many, especially first-time buyers, to afford a home.
How is the Housing Market Market?
The real estate housing market is still favoring sellers. Median sale prices had the largest increase since October 2022 by the week ending December 21. Prices increased because of rising mortgage rates last year and a 13-year low in existing home sales.
Currently, the housing supply is at 4 months; 6 months is balanced. Active listings, or total home supply, increased by 3.9% monthly, the highest since July 2022. Existing home sales rose 0.8% from October to 3.82 million in November, but YoY sales dropped by 7.3%.
Home sales likely hit a low in 2023 and are expected to improve in 2024 slightly. The forecast is 5.5 million combined new and existing home sales in 2024, up from 4.8 million in 2023, according to Yun, NAR’s chief economist.
Buyer demand is decreasing but still exceeds housing supply. Median sale prices increased by 4.2% YoY to $363,628 by the week ending December 17th, the largest rise since October 2022. Mortgage-purchase applications increased by 18% from their early November low in the week ending December 21. Experts predict a 2 to 4 percent nationwide increase in home prices in the first quarter due to the ongoing housing shortage.
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Housing Market Trends
The average median home price in America is $408,732, up 3.7% from last year, rising for the 5th consecutive month. In the last week of December, it had the highest YoY increase due to limited inventory and faster-falling prices last year.
Home sales dropped by 7.4% YoY in November 2023, the smallest decline since June 2022. Active listings increased by 3.1% YoY, and new listings increased by 3%, reflecting rising inventory from reduced homebuying demand.
Rental costs vary across states, with Florida tenants paying an average of $1,790 while those in Texas pay $1,850.
Homes for sale spent a median of 36 days on the market, down by 1 day from last year. The average months of supply are 4 months.
Housing Predictions for 2024:
1. Home sellers are expected to return in 2024 after a five-month decline in existing home sales in 2023.
2. Mortgage rates are forecasted to stabilize, with a predicted decrease from 7.4% to 6.7% by 2024, potentially dipping further to 6.2% by 2025.
3. More home buyers are anticipated as historically high-interest rates ease, bringing back house hunters.
4. Home prices are expected to rise moderately by 3-4%, driven by strong demand and limited inventory.
5. New home construction sales will increase due to falling mortgage rates, reflecting strong demand.
6. iBuyers, like Opendoor and Offerpad, are expected to continue making lowball offers after facing financial challenges in 2023.
When Will the Housing Market Crash?
No need to worry about a housing market crash in 2024. Prices are expected to remain steady or even rise. NAR predicts a 2.6% increase in August 2024, and Freddie Mac foresees a 0.8% rise during the same period.
Here are five reasons why a housing crash is unlikely:
1. Low inventories: Redfin reported a meager 4-month supply of homes for sale in December, preventing a possible price crash as buyers bid aggressively.
2. Limited new housing supply: Homebuilders restrained activities after the last crash, facing challenges in acquiring land and regulatory approvals. A repeat of 15 years ago seems unlikely, and the market depends on builders gradually balancing supply and demand.
3. Growing demand: Factors like the pandemic, remote work surge, and strong interest in homeownership among Millennials and Hispanics contribute to sustained demand for larger homes.
4. Strict lending standards: Stringent lending standards prevent a repeat of lax practices, with new mortgage borrowers boasting excellent credit scores.
5. Muted foreclosure activity: While foreclosures may rise by 2024, they won’t reach the high levels in 2010. Foreclosure repossessions rose 67% in 2022 compared to 2021 but were still down significantly from peak foreclosures in 2010, thanks to homeowners’ comfortable equity cushion and lenders refraining from filing default notices during the pandemic.
2024: Is it a Buyer’s or Seller’s Market?
In 2024, it’s a great market for both sellers and buyers.
Home prices in America have risen by 4.2% and are expected to continue until the supply and demand balance changes. In September 2023, there were 1,487,004 houses for sale, close to the 1.4M homes sold in the summer of 2023, making it a good time to sell.
In December, the mortgage rate dropped from 8% to 6.64%, leading to a 9.4% increase in new listings, the largest since July 2021. Sellers who hesitated due to mortgage rate locks are adjusting to 7%. More homeowners are expected to list their properties in Spring 2024.
Increased existing home listings are bringing back buyers, as seen in the recent 18% rise in mortgage applications from their early November low. House hunters who cannot find affordable homes in 2023 will likely start shopping in 2024.
While housing demand is increasing, newly constructed homes will compete for attention, with builders offering concessions like $30K mortgage buydowns in 2023. Builders will continue offering incentives in 2024, potentially leading to competition with home sellers.
The market in 2024 will see more listings from new construction, baby boomers downsizing, and eager home sellers, resulting in increased properties for sale. Whether you’re looking for a condo in Florida or a single-family home in New Jersey, you may find your dream home next spring.
