The National Association of Realtors’ Real Estate Forecast Summit predicted lower mortgage rates next year and varying views on top markets
DEC. 12, 2023 2:06 PM PT
San Diego could be a top real estate market in 2024 if mortgage rates drop and sales pick up, a new forecast says.
America’s Finest City was singled out as a potential area for increased sales activities and price growth at digital summit Tuesday hosted by the National Association of Realtors.
Not everyone agreed Southern California will see a lot of activity. There were several economists and analysts at the event, but most agreed mortgage rates will be lower next year. That could potentially make it favorable enough for current owners to sell, and make homes more affordable for new buyers.
Danielle Hale, chief economist at Realtor.com, said Rust Belt cities will see much of the increased sales activity but also several Southern California areas that have pent-up demand.
She forecasts the San Diego metro, which includes all of San Diego County, will see sales increase by 11 percent in 2024 and prices will increase 5.4 percent. Realtor.com put San Diego metro as the predicted No. 4 market out of the 100 biggest metro areas. It ranked markets by a combination of sales and price growth.
The top market was Toledo, Ohio, which the website said would see 14 percent sales growth and 8.3 percent price growth. It was followed by Oxnard (18 percent sales increase, 3.3 percent price growth) and Rochester, New York (sales up 6.2 percent, 10.4 percent price growth). Portland, Oregon, had the worst forecast: Sales down 25.6 percent and price down 7.4 percent.
San Diego County’s median home price was $825,000 in October, so Realtor.com predictions would put it around $870,000 by the end of the year.
Lawrence Yun, chief economist at the National Association of Realtors, was less optimistic about high-cost markets like San Diego. He said the majority of increased activity will likely be in Austin, Dallas-Fort Worth, Durham (North Carolina), Harrisburg (Pennsylvania), Houston and Philadelphia.
Yun predicted the average mortgage rate would be 6.3 percent in 2024, and Hale forecast 6.8 percent. Those are both down from the average Tuesday morning of 7.09 percent, said Mortgage News Daily.
The monthly cost for a San Diego County home, using the October median, is roughly $4,855, assuming 20 percent down for a 30-year, fixed-rate mortgage. That would drop to $4,727 in Hale’s prediction and around $4,500 in Yun’s prediction.
Yun said a softening job market, rent prices flattening out and difficulties at community banks are all reasons for the Federal Reserve to stop raising rates, or potentially cut rates. Recent predictions from Goldman Sachs and Barclays suggest two rate cuts coming next year. The Fed is likely to make some indication Wednesday about future plans at the conclusion of its two-day meeting.
Mortgage rates usually follow the yields on mortgage-backed securities. These bonds typically track the yield on the U.S. 10-year Treasury.
Hale said sales predictions would be higher if not for potential first-time buyers, mostly millennials, still being priced out of the market.
“Even though affordability will start to improve,” she said, “the market will remain fairly challenging and affordability is nowhere near where it has been the better part of the last decade.”
Hale said potential changes for millennials could be student debt legislation or new tax breaks for first-time homeowners. There is a congressional bill, called the First-Time Homebuyer Act, which would give first-time buyers $15,000 in refundable federal tax credits. However, it has yet to pass.
“Anything we can do to make getting in the door easier for that younger cohort,” she said, “I think is going to be very important.”
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