However, even with a 23% jump in sales, next year’s market still will be lackluster, figures show.
California’s housing market is expected to recover from the disastrous sales drops of 2023 next year, according to Realtor economists on Wednesday, Sept. 20.
Even with a 23% increase in existing single-family home sales, 2024 will have the fewest transactions since Ronald Reagan ran for reelection in 1984 — and the ninth-lowest in records dating back 55 years.
Also read: California’s homebuying rate falls 32% to a record low.
Nonetheless, the California Association of Realtors predicts that lower mortgage rates and lower inflation will create a slightly more welcoming environment for home sellers to reenter the market.
Lower mortgage rates will also increase home buyers’ purchasing power, increasing competition for a still-limited 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,” said Jennifer Branchini, state Realtor President. “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.”
Also see: Only 400 new jobs in Southern California real estate in August
In total, 327,100 houses are expected to change hands in the coming year, a 22.9% increase from the projected sales total of 266,200 in 2023.
While an improvement over 2023, the third-slowest year in CAR records dating back to 1970, 2024’s projected sales are still well below average, according to CAR records.
Meanwhile, home prices are expected to rise further.
The median price of a California house — or the price at the midpoint of all sales — is expected to reach an all-time high of $860,300 next year, after falling 1.5% this year. This represents a 6.2% increase over this year’s projected median of $810,000.
The main metric driving CAR’s forecast is the expectation that mortgage rates will fall. CAR predicted that 30-year fixed mortgage rates would fall to the mid-5% range by the end of next year. Rates last week averaged 7.2%.
The average 30-year interest rate for the year is expected to be 6%, down from 6.7% in 2023.
Also see: Homebuyers canceling at the highest rate in ten months
This should increase the purchasing power of some high-priced home buyers.
Despite higher prices, the “affordability rate” — or the number of California households able to afford a median-priced home — is expected to remain at 17% next year, according to CAR.
“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,” said CAR Chief Economist Jordan Levine in a statement.
Lower mortgage rates next year may also free up some “locked-in” homeowners who were hesitant to give up a better rate on their current home. This could reduce the supply of for-sale listings and increase sales even further.