California’s housing market is expected to rebound next year from the disastrous sales drops of 2023, Realtor economists predicted Wednesday, Sept. 20.
But even with a 23% jump in sales of existing single-family homes, 2024 still will have the lowest number of transactions since Ronald Reagan was running for reelection in 1984 — and the ninth-lowest in records dating back 55 years.
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Nevertheless, an easing of inflation and lowering of mortgage rates will create a slightly more hospitable environment for home sellers to reenter the market, the California Association of Realtors forecast.
Lower mortgage rates also will increase the buying power of home shoppers, creating more competition for a still-tight supply of for-sale listings and pushing the 2024 home price to a record high.
“2024 will be a better year for the California housing market for both buyers and sellers,” state Realtor President Jennifer Branchini said in a statement. “A more favorable market environment with lower borrowing costs, coupled with an increase in available homes for sale, will motivate buyers and sellers to reenter the market next year.”
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In all, 327,100 houses are expected to change hands in the year ahead, up 22.9% from 2023’s projected sales total of just 266,200 sales.
While an improvement over 2023 — the third-slowest year in records dating back to 1970 — 2024’s projected sales still would be well below average, CAR records show.
Home prices, meanwhile, are forecast to keep climbing.
After falling 1.5% this year from the year before, the median price of a California house — or price at the midpoint of all sales — is forecast to reach an all-time high of $860,300 next year. That would be up 6.2% increase from this year’s projected median of $810,000.
The key metric behind CAR’s forecast is a projection that mortgage rates will fall. CAR predicted that average rates for 30-year fixed mortgages could drop to the mid-5% range by the end of next year. Last week’s rates averaged 7.2%.
For the year as a whole, the average 30-year interest rate is forecast to be 6%, down from 6.7% for all of 2023.
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That should increase the buying power for some priced-out home shoppers.
The “affordability rate” — or the number of California households able to afford a median-priced home — will hold at 17% next year, despite higher prices, CAR predicted.
“Buyers will have more financial flexibility to purchase homes at higher prices, which could generate increased housing demand and result in more upward pressure on home prices,” CAR Chief Economist Jordan Levine said in a statement.
Lower mortgage rates next year also could unlock some “locked-in” homeowners who were reluctant to give up more a favorable rate for their current home. That could ease the supply of for-sale listings and boost sales even more.