According to Realtor economists, California’s housing market is set to bounce back in 2024 following the significant sales drops experienced in 2023.
Despite a projected 23% increase in sales of existing single-family homes, 2024 will still have the lowest number of transactions since 1984, when Ronald Reagan was running for reelection. In fact, it will be the ninth-lowest year for home sales in the past 55 years.
Also see: California homebuying pace plunges 32% to a record low
Nevertheless, the forecast from the California Association of Realtors suggests that an easing of inflation and lower mortgage rates will create a slightly more favorable environment for home sellers looking to enter the market once again.
The decrease in mortgage rates will also increase the purchasing power of homebuyers, leading to more competition in a still limited supply of available properties for sale. This, in turn, will drive home prices to reach a record high in 2024.
“2024 will be a better year for the California housing market for both buyers and sellers,” stated Jennifer Branchini, the President of the state Realtor organization. She added, “A more favorable market environment with lower borrowing costs, coupled with an increase in available homes for sale, will motivate buyers and sellers to reenter the market next year.”
Also see: Southern California real estate bosses add only 400 workers in August
In total, it is projected that 327,100 homes will change hands in the coming year, marking a 22.9% increase from the estimated sales of just 266,200 homes in 2023.
Although this represents an improvement compared to 2023, which was the third-slowest year for home sales since 1970, the forecasted sales figures for 2024 still fall below average according to CAR records.
On the other hand, home prices in California are expected to continue their upward trajectory. After a 1.5% decline this year compared to the previous year, the median price of homes in the state is projected to reach an all-time high of $860,300 in 2024. This would reflect a 6.2% increase from this year’s estimated median price of $810,000.
The key factor influencing CAR’s forecast is the anticipated fall in mortgage rates. The organization predicts that average rates for 30-year fixed mortgages could drop to the mid-5% range by the end of next year, compared to last week’s average rate of 7.2%.
For the entire year, the average 30-year interest rate is expected to be 6%, down from 6.7% in 2023.
Also see: Homebuyers canceling purchases at highest rate in 10 months
Despite the higher prices, CAR predicts that the “affordability rate,” which measures the percentage of California households able to afford a median-priced home, will remain at 17% in 2024.
“Buyers will have more financial flexibility to purchase homes at higher prices, which could generate increased housing demand and result in more upward pressure on home prices,” said CAR Chief Economist Jordan Levine.
In addition, lower mortgage rates in the coming year could incentivize homeowners who were previously hesitant to give up their favorable rates to consider selling their homes. This could help increase the supply of homes for sale and further boost sales.
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