Monthly Housing Market Update - January 2024

Staying informed is key. As we move through 2024, many are asking, "When will the housing market crash again?" While it's impossible to predict with certainty, we can explore current trends and data to make educated guesses. This update is especially focused on the San Diego housing market, a microcosm of the broader California market, providing insights into its current state and potential future.

The Return of Home Buyers

One of the most influential factors in the housing market is interest rates. Their recent decline has sparked a resurgence of activity, with more home buyers returning to the market. This section will delve into the complex relationship between interest rates, housing affordability, and buyer behavior. We'll examine how these lower rates impact different segments of the market, from first-time homebuyers to seasoned investors, and what this could mean for the future of the housing market in San Diego and beyond. Experts seem to agree that housing market rates will drop to the low 6% throughout the year.

When Will Home Prices Be Affordable Again?

Despite this easing, mortgage rates remain elevated and home prices are stubbornly high as historically low housing stock continues to put homeownership out of reach for many—most notably first-time buyers—who remain more pessimistic than ever about being able to afford a home.

Affordability challenges will continue in 2024. Pent-up demand and low inventory will generally bolster prices, and elevated mortgage rates will remain until the Fed implements cuts to the federal funds rate.

Mark Fleming, chief economist at First American Financial Corporation, predicts a “flat stretch” ahead for the housing market. “If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.

Will the Housing Market Crash in 2024?

The possibility of a housing market crash is a topic of continuous debate and analysis. In this section, we'll discuss the indicators and economic factors that experts monitor when making predictions about potential downturns. We'll also explore historical patterns, current economic indicators, and expert opinions to provide a well-rounded view of the potential risks and opportunities in the current market.

Despite some areas seeing price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low. Experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having positive home equity.

Moreover, Orphe Divounguy, senior macroeconomist at Zillow Home Loans, says competition for houses has remained surprisingly resilient despite mortgage rates reaching highs not seen in more than two decades.

“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” Divounguy says, especially as inventory is still constrained. Most experts say supply will remain tight for the foreseeable future.

Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.

Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.

Follow me on Instagram for daily updates, insights, and practical tips on navigating the housing market. And if you're setting your sights on real estate success in 2024, let's talk. Schedule a '2024 Real Estate Goal Call' with me, and together, we can tailor a strategy that aligns with your unique goals and the current market trends.

From exploring the likelihood of a housing market crash to understanding rate changes and regional differences, this blog aims to equip you with the knowledge and confidence to make well-informed real estate decisions in San Diego and beyond.