Even with the happiest place on earth just a stone’s throw away, Realtors are feeling more like Disney’s Grumpy than Happy these days.
“When I look at the statistics, we are not happy,” Lawrence Yun, chief economist for the National Association of Realtors told his membership Tuesday, Nov. 14, in Anaheim.
“We underwent two years of a kind of difficult time period in real estate,” Yun added. “(A) 20-year high in mortgage rates have (caused) our buyers (to have) shockingly higher monthly mortgage payments.”
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A doubling of payments led to a 32% drop in existing home sales over the past two years, curbing income for the vast majority of agents.
Slightly better times are ahead for the nation’s real estate industry, Yun said during his 2024 forecast at the Anaheim Convention Convention Center, where more than 12,000 Realtors are gathered for their annual conference.
Existing home sales are forecast to rise to 4.7 million houses and condos in 2024, up 13.5% from this year’s projected total of 4.2 million transactions.
While an improvement, next year’s sales still will lag the pandemic sales boom, when 5 million to 6 million U.S. homes changed hands annually.
The median price of a U.S. home — or price at the midpoint of all sales — is projected to rise slightly to $389,500, up from an annual record of $386,700 this year.
With the 30-year fixed mortgage rate averaging well above 7% this year, the vast majority of home shoppers have been priced out of the market.
And with large numbers of homeowners hanging onto existing loan rates of 3% or less, buyers this year have been forced to bid on a shrinking pool of homes for sale, pushing prices ever higher.
Yun predicted that mortgage rates are likely to come down next year and that the pool of sellers is likely to get bigger. He also expects the 30-year mortgage rates to drop below 7% by next spring’s busy homebuying season, with a 2024 average in the 6.1% to 6.6% range.
“It will be much better than now,” he said.
That drop in rates will draw more buyers back into the market, he predicted. And because sellers can’t wait forever for today’s rates to match what they now pay on their current mortgage, many who have been waiting to move will put their homes up for sale.
“Over the past two years, people’s lives have changed. Seven million newborn babies. Three million marriages. … Seven million Americans have turned 65,” he said. “People are going to begin to say, ‘You know, life goes on. I don’t want to give up my 3% mortgage rate, but I need a larger house.’ ”
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This means, Yun said, an increased supply of homes for sale along with an increase in homebuyers.
For the economy as a whole, Yun sees signs of economic distress alongside positive indicators.
While the economy is growing at 4.9% this year, business growth is essentially flat thanks to high borrowing costs. Credit card delinquency rates are at historically low levels but are starting to tick upwards. The historically low unemployment rate is turning around and now is at the highest level in two years.
“Things are beginning to shift,” Yun said. “Maybe we’re not in a recession, but we could fall into a recession if these (trends) continue.”