Thursday, December 14, 2023

Existing Home Sales on Track for Worst Year Since at Least 2008

'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...'

(Existing home sales are on track for a dismal year, likely dropping 18% and on course for the worst year since at least 2008’s Great Recession and possibly the worst since 1995.

And while prices may soften in 2024, single-family homes will remain out of reach for many Americans, National Association of Realtors Chief Economist Lawrence Yun said Tuesday in the real estate organization’s annual summit.

TCS - NAR chart 2023

The previous times when home sales were at similar levels both indicated a recessionary economy, although the Biden administration has steadfastly denied any such thing—partially by attempting to redefine the meaning of the word “recession.”

Despite the Democrat president’s efforts to sell himself as a successful steward of the nation’s financial affairs, voters have remained unconvinced, scoring him particularly low marks as inflation, along with sky-high interest rates, force many to fall back on credit and hope for the best.

The Federal Reserve is expected to cut rates next year, but Yun said he expects the average U.S. mortgage rate to remain around 6.3% in 2024, much higher than rates over the last decade.

He said he expects the Federal Reserve to cut rates up to four times in 2024, with the first rate cut coming in the spring of next year. Those expected rate cuts, plus other data points, could lead to more home sales in 2024, Yun said.

“So the forecast is that home sales after two straight years of difficulty will begin to rise next year,” he said Tuesday.

Yun predicted existing-home sales would increase 13% in 2024.

Pent-up demand in some areas could make for significant growth in the new year.

“What we are finding is that the area’s with strong home sales growth potential next year in the south region will be Austin, Dallas, Houston, Nashville to come back,” Yun said.

The Durham-Chapel Hill area could “become the next Austin,” Yun said.

TCS - Top Pent-up demand markets

Homes could become more affordable in 2024, but not by much, said Danielle Hale, the chief economist for realtor.com.

“One thing that I think is going to be a bright spot for buyers in 2024, for many of whom are probably worn out from the persistent theme of a lack of affordability that we’ve seen in the housing market is that we actually do expect affordability to start to improve and 2024,” she said. “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.”

Headline USA’s Ben Sellers contributed to this report.

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