The National Association of Realtors (NAR) has reported that the U.S. housing market has started strongly in 2024.
The NAR Pending Home Sales Index, which measures the number of homes under contract to be sold, rose 8.3% in December 2023 to 77.3.
This increase signals rising demand as mortgage rates stabilize, and it’s the highest monthly increase since June 2020.
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- The housing market is forecast to rebound in 2024, with existing home sales rising 13%, fueled by lower rates and affordable prices.
- Inventory remains low nationwide. More new construction is needed to fully satisfy buyer demand and keep home prices from escalating.
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Home Sales See Biggest Jump in Over 3 Year
In December, pending home sales were up 1.3% annually.
Lawrence Yun, chief economist at NAR, mentioned, “The housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices. Job additions and income growth will further help with housing affordability. Still, increased supply will be essential to satisfy all potential demand.”
Mortgage rates surged to around 8% in late 2022 before moderating, which resulted in a spike in pending sales.
However, rates for 30-year fixed mortgages are currently averaging 6-7%, down from the 20-year highs seen last fall.
This decline returns buyers to the market, especially in Western and Southern states.
Pending sales jumped 14% in the West and 11.9% in the South.
The Northeast saw a small 3% drop in December.
NAR forecasts that existing home sales will increase by 13% to 4.62 million units in 2024 as lower rates boost affordability.
Median home prices are expected to rise moderately by 1.4% to $395,100.
The outlook is for the Federal Reserve to cut interest rates several times this year, keeping average 30-year fixed mortgage rates in the 6-7% range.
The data and forecast indicate that the housing market is transitioning from the slump of 2022 into a period of greater stability and growth.
While high mortgage rates limited sales last year, lower rates coupled with strong employment growth and incomes will bring more buyers into the market.
Sellers can also expect less competition and more stable prices.
However, supply remains constrained nationwide.
Builders need to ramp up new construction for the housing recovery to be sustained.
The inventory of homes for sale was very low throughout 2022.
Until more homes hit the market, sales growth will be hampered regardless of mortgage rate trends.
Overall, the surge in pending home sales is an optimistic signal for the housing sector as 2024 progresses.
With affordability improving, buyer demand is returning quickly, especially in regions like the West.
Sellers who waited out 2022 will find motivated buyers ready to transact.
But more new construction is essential to satisfy pent-up demand and keep home prices affordable.
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