Current market conditions

Home sales are rebounding

Nationwide, existing-home sales ticked up 0.8% month-over-month in November 2023 to a seasonally adjusted annual rate of 3.82 million, according to the National Association of Realtors. This ended a five-month period of decline but can be largely attributed to mortgage rates peaking in October — reaching a 23-year high of 7.79%.

Compared to the previous year, existing-home sales were down 7.3% in November 2023. The Midwest and South saw improvements in existing-home sales, while the Northeast and West saw declines.

Mortgage rates dipped below 7% in December 2023 and have held steady at 6.6% as of January 2024. “A marked turn can be expected as mortgage rates have plunged in recent weeks,” says NAR Chief Economist Lawrence Yun, who predicts home sales will increase 13.5% year-over-year in 2024.

In November 2023, sales of new single-family homes sank 12.2% below the U.S. Census Bureau’s revised October rate of 672,000 but were 1.4% higher than the same period one year earlier. Tight inventory in the resale market has driven up interest in the new construction market, but rising new home prices and high mortgage rates are hampering affordability.

Inventory is improving after reaching record lows

The active listing count — which includes single-family homes, townhomes, and condos — hit 714,176 in December 2023, according to the St. Louis Fed. The number of homes for sale decreased by 5.6% from November to December 2023, although that’s fairly typical during the holiday season. Compared to the previous December, inventory improved by 4.8% and has been trending upward since bottoming out in February 2022.

Yun anticipates a 30% increase in housing inventory in 2024 as buyers and sellers return to the market. However, a surge in new listings isn’t enough to combat the nationwide housing shortage, estimated at approximately 3.2 million homes. As a result, the market is expected to remain in seller’s territory throughout 2024 and potentially beyond.

While buyers wait eagerly for housing inventory to increase, top agents surveyed by HomeLight recommend they consider properties in need of minor upgrades, check in with their agents regularly to assess the market, leverage off-market or pocket listings, and explore new construction options.

Mortgage rates are inching lower

The average 30-year mortgage rate soared to 7.79% in October 2023 — the highest in more than two decades — but has been steadily falling ever since. So far in January 2024, mortgage rates have been hovering around 6.66%.

The Federal Reserve announced in December that it expects to cut interest rates three times in 2024. In a research note, Goldman Sachs Chief Economist Jan Hatzius, wrote, “The Fed will start cutting the funds rate soon, most likely in March.”

Industry experts predict mortgage rates will drop to 6.1%-6.6% by the end of this year, with further cuts expected in 2025. Prospective buyers could get drawn back into the housing market this spring if the Fed begins to lower the benchmark federal-funds rate.

Prices remain high due to tight inventory

According to NAR, the median existing-home price for all housing types jumped 4% year-over-year in November, reaching $387,600. NAR Chief Economist Lawrence Yun expects the median sales price of a single-family home to inch up 0.9% year-over-year to $389,500 in 2024, while Bright MLS, a regional multiple listing service in the Mid-Atlantic, predicts home prices will increase 1.5% to $394,200.

Even though market conditions are improving, stubbornly high home prices just aren’t budging because existing-home inventory is tight and U.S. home builders are not keeping up with demand. “More inventory will be generally offset by more buyers in the market,” wrote Chief Economist Lisa Sturtevant in Bright MLS’s 2024 National Housing Market Outlook.