The U.S. economy navigated through 2023 without succumbing to recession, as consumer resilience surpassed the expectations of many economists. Despite grappling with elevated inflation, banking instability, and significant workforce reductions by prominent companies, consumer sentiment remained relatively positive, with a modest recovery observed toward the close of 2023. Conversely, the housing sector encountered challenges, marked by persistent high mortgage rates and constrained supply.
Economic Overview:
- Resilient Consumer Base:
Despite challenges such as high inflation and workforce reductions, consumers exhibited unexpected resilience, buoying the economy through 2023.
- Housing Market Struggles:
The housing market faced obstacles with elevated mortgage rates and limited supply, impacting its performance throughout the year.
Interest Rate Projections:
- Federal Reserve Actions:
The Fed is anticipated to reduce its policy rate in response to economic conditions, though the timing is contingent upon signs of inflation easing.
- Mortgage Rate Forecast:
The average 30-year fixed-rate mortgage is expected to gradually decline to around 6.5% by mid-year and potentially reach 6% by the end of 2024.
Housing Market Trends:
- Supply Dynamics:
As interest rates decrease, the lock-in effect is expected to diminish, leading to increased property listings and a rise in newly built housing units.
- Market Activity:
Lower borrowing costs and expanded housing availability are anticipated to motivate both buyers and sellers to reengage with the market in the upcoming home buying season.
Sales and Price Projections:
- Sales Momentum:
While Q1 2024 sales may experience modest growth, momentum is projected to pick up later in the year, particularly in California, which is expected to witness a double-digit sales increase.
- Price Forecast:
Lower interest rates and tight housing supply are likely to drive upward pressure on home prices, with California’s median price forecasted to grow by 5.7% year-over-year, rebounding from a slight decline in 2023.
