Housing Matters Podcast CALIFORNIA ASSOCIATION OF REALTORS and the CENTER FOR CALIFORNIA REAL ESTATE

With interest rates rising further in 2023, housing affordability continued to deteriorate for all ethnic groups last year. While the affordability gaps had narrowed between groups, they remained wide. The disparity will not likely improve much this year, as home prices are expected to increase moderately in 2024.

Join C.A.R. economists as they discuss the Fed's rate movement, the latest market report, and recent updates on the economy. Fed officials still expect rates to come down by 75 basis points this year, despite sticky inflation in the past few months. Meanwhile, the market continues to do better as home sales grew month-over-month and year-over-year. Inventory and affordability will remain issues in coming months, but consumer sentiment is gradually improving.

California had a good start in 2024 with both housing supply and buyer demand showing signs of improvement in January. The housing market could face headwinds in the coming months though, as mortgage rates remain on the rising trend. Inflation is expected to stabilize throughout the next 12 months, however, and rates could ease again starting in the second quarter.

The housing market had a tough year in 2023 as tight supply and high costs of borrowing continued to create challenges for buyers and sellers. With rates declining to a 7-month low late last year, the market began to see an increase in activity at the start of the year, but the improvement is expected to be gradual. Rising insurance costs and uncertainty in the commercial real estate sector will remain some of the market risks in 2024.

Mortgage rates have shown improvements lately as Fed’s officials softened their tones after their latest FOMC meeting and suggested that the Central Bank could be done with rate hikes. Meanwhile, sales of existing homes in California dipped again by double-digits on a year-over-year basis in October as costs of borrowing remained elevated while supply continued to be tight.

Home sales in California declined further last month as buyers and sellers continued to struggle with the high-mortgage-interest rate landscape not seen in the last two decades. The sharp increase in the past few weeks was due primarily to the Fed’s announcement at their latest meeting that rates will be kept “higher for longer”, which dashed market participants’ hope for more significant rate cuts in 2024. As investors continue to assess the economic outlook and the uncertainty brought on by the geopolitical tensions in the Middle East, there will be more volatility on rates in the short term.