C.A.R. Releases Positive 2024 California Housing Market Forecast, Anticipating Rebound
Los Angeles, September 20, 2023 — The California Association of Realtors (C.A.R.) has released its “2024 California Housing Market Forecast,” projecting a notable rebound in the state’s housing market. The forecast indicates that slower economic growth and cooling inflation will contribute to a more favorable environment for home sales in 2024.
- Sales Surge: The baseline scenario predicts a substantial increase of 22.9 percent in existing single-family home sales in 2024, totaling 327,100 units. This follows a projected decrease in sales for 2023, which is expected to be 22.2 percent lower than the pace observed in 2022.
- Median Home Price: California’s median home price is forecasted to rise by 6.2 percent to $860,300 in 2024, bouncing back from a projected 1.5 percent decrease to $810,000 in 2023. Persistent housing shortages and a competitive market are cited as factors contributing to upward pressure on home prices.
- Housing Affordability: Despite the positive outlook, housing affordability is expected to remain flat at 17 percent in 2024, consistent with the projected figure for 2023.
- Market Drivers: Slower economic growth and cooling inflation are anticipated to bring down mortgage interest rates in 2024, creating a more conducive market environment. This is expected to motivate both buyers and sellers to reenter the market, with the availability of homes for sale on the rise.
- Buyer and Seller Dynamics: C.A.R. President Jennifer Branchini notes that 2024 will be a better year for both buyers and sellers, emphasizing the expected decline in mortgage interest rates. The market is anticipated to attract first-time buyers who were previously hindered by a competitive market and repeat buyers overcoming the “lock-in effect.”
- Economic Indicators: C.A.R.’s forecast predicts a 0.7 percent increase in the U.S. gross domestic product in 2024, with California’s nonfarm job growth rate at 0.5 percent. However, the state’s unemployment rate is projected to increase to 5.0 percent in 2024 from 4.6 percent in 2023.
- Inflation and Mortgage Rates: Inflation is expected to gradually decline, with the Consumer Price Index registering 2.6 percent in 2024. The average 30-year fixed mortgage interest rate is projected to decline from 6.7 percent in 2023 to 6.0 percent in 2024, providing buyers with increased financial flexibility.
- Housing Supply: Despite a projected increase in active listings of 10 to 20 percent, housing supply in 2024 is expected to remain below the norm. Market conditions and an improving lending environment contribute to this dynamic.
C.A.R. Senior Vice President and Chief Economist Jordan Levine anticipates the Federal Reserve Bank loosening its monetary policy in 2024, leading to further declines in mortgage rates. The average 30-year fixed-rate mortgage could reach the mid-5% range by the end of the year, potentially generating increased housing demand and placing upward pressure on home prices.
SoCal Housing Forecast: Bright or Gloom
According to Steven Thomas, a California Real Estate Broker, while some intelligent voices suggest a risk of overshooting and triggering a more profound recession, it appears that there’s a newfound determination to avoid the delays observed in past market responses. However, there seems to be a subtle retreat from these statements, likely driven by a desire to prevent a further decline in the tenure, a drop in interest rates, and excessive volatility on Wall Street.
Various narratives highlight concerns about the labor market’s persistent heat, a potential kickback trend, and global turmoil, with Washington, D.C., perennially making the list of concerns. Thomas’ forecast for the year anticipates an exceptionally low inventory, starting at around 18,000 homes in Southern California, making 2022 the year with the fewest homes entering the market. Distress is expected to rise slightly, with no substantial wave in sight.
The luxury segment is projected to undergo a sluggish transition to normal, experiencing longer market times due to stock market volatility. However, this doesn’t imply a decline in values but rather a natural extension in the time luxury properties take to sell. Interest rates are expected to range from five percent and lower.
Three scenarios are presented, with Scenario One suggesting a 40% chance of the economy cooling during spring, 50% by summer, and a 10% chance by fall. Scenario Two envisions a 90% chance of the economy cooling by summer, resulting in rising inventory. Scenario Three, with a 10% chance, contemplates a cooling economy in the fall, leading to increased inventory.
Despite the uncertainty, the forecast concludes on a positive note, projecting an increase in closed sales and home values in 2024, regardless of the specific scenario unfolding.