The California Association of Realtors forecasts that easing inflation and reduced loan rates will create a more favorable environment for home sellers, encouraging them to re-enter the market. Lower rates will enhance buyers' purchasing power, intensify competition for listed properties, and consequently drive up housing prices in 2024.
Association President Brannigan stated that it will be a better year for both buyers and sellers in 2024. A more favorable market environment, lower borrowing costs, and an increase in inventory of homes for sale will motivate both parties to re-enter the market.
According to the association's estimates, there will be 327,100 homes changing hands in the next year, representing a 22.9% increase from the projected sales total of 266,200 in 2023. While 2023 marked the slowest year of sales on record, the projected improvement in home sales for 2024 still falls significantly below the average levels.
Simultaneously, home prices are expected to continue their upward trajectory. The median price for California home sales dropped by 1.5% this year, but is forecasted to reach a historic high of $863,000 next year, marking a 6.2% increase.
One of the key indicators behind these projections is the decrease in loan rates. The association predicts that by the end of next year, the average rate for a 30-year fixed-rate loan could fall to 5%, down from the current 7.2%. The reduction in loan rates will boost the purchasing power of some high-end home buyers.
Despite the price surge, it is projected that the percentage of households able to afford the median-priced home in California will remain around 17% next year. Chief economist Langley of the association pointed out that buyers will have greater financial flexibility to purchase at higher price points, potentially increasing the demand for listings and further driving up prices.
Lower loan rates next year may also incentivize some homeowners who have been reluctant to give up their current favorable rates to put their homes on the market. This could ease the tension in the supply of homes for sale and potentially boost home sales.
