Will California Housing Market Rebound in 2024 as Mortgage Rates Decrease?

The Federal Reserve Has Spoken

Interest rates are holding steady for now. But hints of future rate cuts suggest brighter days ahead for homebuyers.

Last Wednesday, the Federal Reserve announced its plan to maintain the federal funds rate at current levels. However, it predicts up to three rate cuts in 2024 if inflation keeps creeping toward the 2% target. This forecast signals potential rate relief on the horizon.

What does this mean for prospective homebuyers? Simply put, lower rates. The Fed doesn’t directly set mortgage rates, but its management of the federal funds rate influences lenders’ decisions. So, if the predicted 0.75% in cuts comes to fruition, spread across three meetings next year, mortgage rates could take a sizable dip.

For buyers competing in today’s housing market, this is a glimmer of hope. Inventory is sparse, with hesitant sellers waiting out high rates and limited options before listing their homes. Eager buyers are biding their time too, hungry for more choices and affordable financing.

When the stars align – moderating rates and rebounding inventory – these buyers will be ready. For now, the Fed’s forecast has given them reason to be optimistic about the road ahead.

In 2023, the Fed increased the federal funds rate four times:

• February: +0.25 percentage points
• March: +0.25 percentage points
• May: +0.25 percentage points
• June: no change
• July: +0.25 percentage points
• September: no change
• November: no change
• December: no change

Slower economic growth and cooling inflation will bring down mortgage interest rates in 2024 and create a more favorable market environment to spur California home sales next year, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

• Existing, single-family home sales are forecast to total 327,100 units in 2024, an increase of 22.9 percent from 2023’s projected pace of 266,200.
• California’s median home price is forecast to climb 6.2 percent to $860,300 in 2024, following a projected 1.5 percent decrease to $810,000 in 2023 from 2022’s $822,300.
• Housing affordability or the percent of households who can afford median-priced homes is expected to remain flat at 17 percent next year from a projected 17 percent in 2023.

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Paul Burrowes, CRS, CCEC, SFR, NHCP, LHC, REALTOR® DRE# 01955563 (831) 295-5130  paul@burrowes.com

Licensed REALTOR® with over 15 years of experience and expertise.  Commits to being on time and transparent. Acts as your consultant to ensure you make the best decisions to fit your transaction at every step in the process. Negotiates towards a low stress, win-win outcome. Handles all the details for you, ensuring the hundreds of steps in your real estate transaction go smoothly. Proudly serving Silicon Valley, Santa Cruz, Monterey, and Santa Clara Counties!