The housing market is on the brink of a dramatic turnaround after back-to-back down years, according to the National Association of Realtors (NAR).
US home sales are on pace to plummet about 18% in 2023, the NAR noted in a recent report, which would be the biggest drop in at least 15 years. Fewer than four million houses will change hands for the first time since 2010, which was just before the recovery from the financial crisis.
National Association of Realtors
Prospective buyers were pummeled by the highest mortgage rates in decades. The rate on a 30-year fixed mortgage peaked near 7.8% in late October as interest rates skyrocketed.
Surprisingly, weaker demand didn’t bring down home prices meaningfully, the NAR found. Instead, sale values kept increasing since there simply weren’t enough houses on the market, which added insult to injury for financially stressed buyers.
National Association of Realtors
However, 2024 will give everyone — from buyers to sellers to realtors — a reason to celebrate.
A 30-year fixed mortgage rate will tumble to an average of 6.3% next year, according to projections from the NAR, which is far from ideal but is still a marked improvement. The firm projects that the Federal Reserve will cut interest rates four times in 2024, starting in the spring.
“The decline in mortgage rates is expected to draw more buyers, including those returning to the market, consequently bolstering demand for housing,” NAR researchers wrote in the report. “These lower mortgage rates will also ease the rate lock-in effect by enticing more existing homeowners to re-enter the market and list their homes.”
Improvements in affordability will lead to a resurgence in housing market activity, according to the NAR. It expects new home sales to rise 19% and existing property sales to grow 13%, which will lead to windfalls for realtors. Sellers should also enjoy home price gains, the NAR said.
National Association of Realtors
10 cities with strong pent-up demand in 2024
To determine which real estate markets will reap the rewards of next year’s housing market rebound, the NAR created a list of 10 metropolitan areas that have the most pent-up demand right now. These cities are sleeping giants where home transactions will explode after a dormant stretch.
The NAR put together the list by analyzing 10 factors in the 100 largest US markets, including how much home prices rose in Q3 2023 from the year prior, how many renters in the market can afford to buy, and how many buyers may re-enter the market if mortgage rates fall back to 6.5%. Other considerations included the metro area’s job growth rate, income growth rate, and crime rate.
Each market is below, along with its home price growth in 2023, the share of renters who could afford to buy a median-priced home in the market, the share of returning buyers if mortgage rates fall to 6.5% or lower, and additional commentary from the National Association of Realtors.
