In a previous article, we speculated on the possibility that California’s home-price downturn might end. Since then, even more evidence has come to light reinforcing that analysis. For example, data from Zillow and other sources show that the median home price has risen over the past few months.
A new report from the California Association of Realtors predicts that home sales and prices will rise in 2024. So, let’s look at these two “upturn” predictions for the California real estate market in 2024.
C.A.R. Predictions for the California Real Estate Market
Last week, the California Association of REALTORS (C.A.R.) published its “2024 California housing market forecast” report and outlook. These predictions have become an annual tradition for the statewide Realtor Association.
Their latest outlook offers two optimistic housing market predictions for 2024. The industry group expects to see an increase in home sales and prices in the California housing market next year.
Here are three of the critical predictions contained in this latest California housing market forecast for 2024:
The researchers expect that existing single-family home sales will total 327,100 units in 2024, a nearly 23% increase from 2023’s projected sales pace.
Housing affordability (the percentage of households that can afford a median-priced home) is expected to remain at 17% next year, the same as in 2023.
They predict that California’s median home price will rise roughly 6% in 2024, climbing to around $860,300 by year’s end. This would indicate a substantial turnaround from the slight decline in prices over the past year. This follows an expected 1.5% decline in 2023 to $810,000 from $822,300 in 2022.
According to C.A.R. President Jennifer Branchini:
“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.”
Overall, the group suggests that the California real estate market could become more active over the coming months, with increased sales and buyer competition.
What Does It Mean For Home Buyers?
Housing market predictions are the equivalent of an educated guess. We should view them with an open mind and some healthy skepticism.
In this report, C.A.R.’s research team analyzed current trends within the real estate market to offer some data-based predictions about where we might be headed in 2024. So there’s a good chance these California housing market predictions could hit the mark or at least come close.
If they do pan out, it would signify a turning point for the housing market in California that could affect home buyers all across the state.
Here are three ways these anticipated trends could affect home buyers in 2024:
An upturn in house prices
As mentioned above, the median home price in California declined slightly over the past year or so. The same is true for most other states across the country.
During the pandemic years, home prices rose so much and so fast that they eventually got ahead of buyer demand. And that kind of trend usually only lasts for a short time.
Last year, real estate markets began to “reset” to a new normal. And that brought a general decline in home prices in California and elsewhere.
But this post-pandemic market downturn has faded, with the prospect of steadily rising house prices in 2024. This could create a renewed sense of urgency among home buyers in California, especially those planning to purchase in 2024.
A slight improvement in the inventory situation
Like much of the country, the California real estate market grapples with a persistent inventory shortage. This means there need to be more homes listed for sale to meet the demand from buyers.
One of C.A.R.’s offered some good news on this front. Their researchers expect a moderate increase in the number of homes for sale over the next year.
To quote their report one more time:
“Housing supply in 2024 will remain below the norm despite a projected increase in active listings of 10 percent to 20 percent, as market conditions and the lending environment continue to improve.”
At first glance, inventory growth of around 15% might seem small. But the truth is, any supply gains would be welcomed at this point. It would give California home buyers more properties to choose from and a greater chance of success while increasing overall sales volume.
A more active market with a faster sales pace
The group predicted that California’s total number of home sales would increase significantly in 2024. The market could also accelerate with an overall faster pace of sales. And there’s evidence to suggest this is happening already.
Since the start of this year, the average number of “days on the market” for real estate listings in California has declined sharply. In short, this means homes are selling faster today than at the start of the year. This usually indicates an increase in buyer activity as well.
California home buyers should keep a close eye on this trend as well. It could affect everything from your negotiating ability to the price you pay for a home.
Other Noteworthy Expectations For the California Housing Market in 2024
The recent C.A.R report on the real estate market outlook for 2024 in California also outlines a couple of other interesting points:
Mortgage interest rates are expected to dip in 2024.
In addition to the recent C.A.R. report, it’s worth discussing what mortgage interest rates may do next year, as rates directly impact the overall cost of buying a house in California.
Currently, mortgage rates are very high in California and throughout the US. According to the most recent data from the Mortgage Bankers Association (MBA), the rate for a 30-year fixed-rate mortgage is currently 7.27%. Rates have continued to climb over recent months, making it increasingly more difficult for buyers to get approved for a mortgage.
But there may be good news for buyers, as the MBA anticipates rates gradually decreasing throughout the remainder of 2023 and dipping further in 2024 as the economy remains sluggish. MBA analysts expect mortgage interest rates to dip to 5.4% by the fourth quarter of 2024.
That means home buyers in California may soon be able to lock in at much lower rates than we’ve currently seen. Even if home prices increase, lower rates will make it easier to qualify for a mortgage and give them more incentive to buy a home in 2024. Lower rates will also incentivize homeowners in California to refinance their mortgages to save money on their home loans.
More housing inventory and lower mortgage rates mean the housing market in 2024 is expected to be more favorable for buyers regarding housing availability and affordability.
The GDP may inch up, and inflation may cool
The economy’s overall health plays a vital role in the value of real estate, typically measured by economic indicators, including the gross domestic product (GDP). Generally speaking, when the economy is slow, so is the housing market.
C.A.R.’s recent report anticipates the GDP to increase by 0.7% in 2024, following a 1.7% projected increase in 2023. California’s unemployment rate is expected to increase to 5.0% in 2024, up from 2023’s projected rate of 4.6%.
While the US GDP is predicted to rise, inflation is expected to decline over the remainder of 2023 and 2024 gradually. During higher inflation, mortgage interest rates typically tend to increase, while the opposite is true. Cooling inflation may help keep mortgage interest rates lower in 2024 compared to 2023 and 2022.
All of these California housing market predictions for 2024 can be summed up with a single sentence. After a year-long cooling trend that has affected most of the country, the California housing market could ramp up again in 2024 due to increased demand from buyers.
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