Chief Economist of the National Association of Realtors (NAR), Lawrence Yun, anticipates a 15% surge in existing home sales next year and projects mortgage rates to stabilize between 6-7% by Spring 2024. The report also highlights an unprecedented 22% rise in buyer income, marking the largest yearly increase, with down payments reaching their highest levels in two decades.
On Nov. 15, 2023, in Anaheim, California, during the NAR NXT, The Realtor® Experience event, Yun provided insights into the challenging landscape of the American homebuying journey. He highlighted the trio of high mortgage rates, elevated home prices and a scant housing supply as key hurdles.
In his analysis of the U.S. housing market’s current condition and his forecast for 2024, Yun noted that 2023 was marked by steep mortgage rates and a shortage of available homes. He emphasized, “Twenty-year-high mortgage rates have held off home buyers. There’s also a lack of housing inventory to sell, which means fewer opportunities for sales in the marketplace.”
Yun pointed out a probable 18% decline in home sales this year, adding to the previous year’s 17% fall. High-interest rates have pushed the 30-year fixed mortgage rates to around 8% in 2023. Yun remarked on the significant influence of these rates on the overall economic health of the U.S.
While referencing the latest 4.9% growth in GDP, Yun cautioned about underlying economic concerns, such as stagnant business spending and rising goods inventory, indicating overproduction and underconsumption. Yun warned, “We cannot keep adding to the shelves,” said Yun. “Just like in housing, businesses have to borrow money, and business spending is down because it’s more expensive to borrow.”
Discussing employment trends, Yun expressed concerns over diminishing job market strength and potential future declines. He also mentioned the recent stabilization in the consumer price index (CPI), suggesting a possible shift in the Federal Reserve’s approach.
Yun further addressed the housing market, underscoring the challenge high prices and limited inventory pose, especially for first-time buyers. He projected a potential decrease in mortgage and Federal funds rates, saying, “I believe we’ve hit the peak in interest rates. The key question now is when they will start to decrease.”
Mortgage Rates of 6-7%
Yun’s forecast includes a drop in interest rates to about 6-7% by next spring, leading to an increased presence of sellers in the market. He noted a 5% increase in new home sales year-to-date and highlighted the benefit this holds for builders in a market short on inventory.
He stressed NAR’s ongoing efforts to boost housing supply, predicting a rise in listings and a steady performance in new home sales. Yun expects existing home sales to climb by 15% in the coming year. He also anticipated a market uplift once international buyers return.
Value of Homeownership
He reiterated the value of homeownership, stating, “Consumers are happy with real estate service. The market is fiercely competitive with so many business models among which to choose – from do-it-yourselfers to iBuyers to discount brokerages to full service and rebates. American home buyers have benefited immensely from such wide-ranging choices in real estate services. Moreover, homeowners have accumulated sizable wealth over time.”
About the National Association of Realtors®: The National Association of Realtors® is the largest trade association in the U.S., representing over 1.5 million members across the residential and commercial real estate sectors. The term Realtor® is a registered collective membership mark denoting a real estate professional who is part of the National Association of Realtors® and adheres to its rigorous Code of Ethics.