An aerial view of homes in a housing development in Santa Clarita, Calif., on Sept. 8, 2023 (Mario Tama/Getty Images)
California housing prices are expected to rise 6.2 percent next year as inflation cools and mortgage interest rates drop, according to the latest report by the California Association of Realtors.
Even with price increases, 2024 should bring increased single-family sales of nearly 30 percent, the association reported.
The association, a statewide real estate trade group with more than 185,000 members, expects 317,100 homes to switch hands in 2024—a 23 percent increase over 2023—and the average home price to reach $860,300.
“2024 will be a better year for the California housing market for both buyers and sellers as mortgage interest rates are expected to decline next year,” the association’s President Jennifer Branchini, a Bay Area realtor, said in a statement in September when the report was released. “A more favorable market environment with lower borrowing costs, coupled with an increase in available homes for sale will motivate buyers and sellers to re-enter the market next year.”
The association also expects first-time home buyers who were squeezed out of the highly competitive market in the last few years will enter the market next year.
Repeat buyers are also expected to return as mortgage rates begin to drop, according to the association.
Homes await buyers in the city of Irvine, Calif., on Sept. 21, 2020. (John Fredricks/The Epoch Times)
The group’s 2024 forecast predicts the national gross domestic product (GDP), a measurement of economic growth in goods and services, to grow at a slower rate of 0.7 percent next year.
The association expects the GDP to increase by 1.7 percent in 2023 when the final numbers come in. However, the Congressional Budget Office, a federal budget agency serving Congress, predicts real GDP, which is economic growth adjusted to remove the effects of inflation to be 0.1 percent this year.
As inflation declines over the next 18 months, the interest rate on an average 30-year, fixed-rate mortgage will drop from today’s 6.7 percent to 6 percent in 2024, the association reported.
National Sales Growth Predicted
In March, a panel of experts also predicted national home prices would grow at a steady pace starting next year after bottoming out in 2023, according to the national real estate company Zillow.
The 117 housing market experts and economists polled by Zillow last December, expected home prices to fall 1.6 percent through December 2023. Higher mortgage rates have dampened buyers’ enthusiasm, Zillow reported.
Starting next year, Zillow’s panel of experts foresees prices to pick back up at an average clip of 3.5 percent every year through 2027, the same rate they grew during a stable period from 1987 to 1999, before the housing boom and bust cycle started in the 2000s.
“The housing market is resetting,” said Zillow’s senior economist Jeff Tucker in a press release from March. “The sheer number of people in the first-time homebuyers age range and a lack of inventory should limit price declines. A return to more normal growth would be welcome after the rollercoaster ride that home prices have been on lately.”