Phil Castle, The Business Times

Home sales are expected to rebound in the United States in 2024 even as interest rates on mortgages relent, according to a forecast presented by the National Association of Realtors.

Lawrence Yun, chief economist of the NAR, detailed his outlook during what was billed as a real estate forecast summit.

Bray & Co. Real Estate in Grand Junction streamed the presentation by Zoom.

Yun acknowledged 2023 was a difficult year for the real estate industry with what likely will be an 18 percent decline in existing home sales and the lowest numbers since 2008 and 1995.

Still, new home sales rose 4.5 percent through October 2023 on a year-over-year basis for the third or fourth best year since 2008, he said.

Single-family housing starts have returned to the long-term average after a decade of underproduction. Multi-family housing starts have reached cyclical highs for three straight years, he said.

Home prices have appreciated over the past three years in all 50 states, he said. Home prices rose 41.8 percent in Colorado between the first quarter of 2020 and third quarter of 2023.

Monthly job gains have slowed, Yun said. In Colorado, payroll employment increased 3.9 percent between March 2020 and October 2023.

Looking ahead to 2024, Yun forecast 4.71 million existing home sales, up 13.5 percent from the 4.1 million sales anticipated for 2023. Annual median home prices are expected to remain unchanged, improving affordability given rising incomes.

After topping 8 percent in 2023, 30-year fixed mortgage rates will average 6.3 percent in 2024, he said.

Yun expects the Federal Reserve Open Market Committee to cut its key short-term interest rate four times next year as inflation relents. Rising rental prices, a contributor to inflation, will calm further in 2024. The Federal Reserve also will cut the interest rate to address problems at community banks, he said.

Yun forecast 1.48 million housing starts in 2024 with more than 1 million single-family homes and 440,000 multifamily units.

Along with Yun, the forecast summit featured Danielle Hale, chief economist of Realtor.com; Danushka Nanayakkara, assistant vice president of forecasting and analysis with the National Association of Homebuilders; and Ken Simonson, chief economist of the Association of General Contractors of America.

Hale expects homes to become more affordable in 2024 with a slower pace of appreciation and what she forecast as an average 30-year fixed mortgage interest rate of 6.8 percent in 2024. But the difference will constitute only what she described as a “baby step in the right direction.”

Nanayakkara said she expects 950,000 housing units will be constructed in 2024, but that will remain below the 1.5 million units needed to keep pace with demand. Homebuilders face headwinds, she said, in labor and lot shortages and financing issues.

Simonson said most sectors of the construction industry are doing well with the exception of single-family homes. Increased government spending for infrastructure has helped.

Builders face challenges, though, in labor shortages, high interest rates on financing, supply chain issues and increasing property insurance rates. In terms of labor availability, he said builders would like to hire twice as many applicants as are available.