Dramatically Improving Economic Indicators
Suggest a Brighter 2024 Housing Market
- In the last 2 months of 2023, the average, weekly, 30-year mortgage interest rate dropped from 7.79% to 6.61%. With the fall in inflation this past year, the Fed is widely expected to begin dropping its benchmark rate, probably in multiple steps, in 2024. The consensus forecast among analysts is for further declines in mortgage interest rates.
- After its end-of-year rally, the S&P Index was up 25% and the Nasdaq up 45% in 2023. This plays a major role in Bay Area household wealth.
- On an annual basis, the 2023 median house sales price was down 13% from 2022, while on a quarterly basis, the Q4 price was down less than 1% year-over-year.
The 2023 market was characterized by high interest rates, financial market uncertainty, negative media “doom-loop” narratives (terribly overdone), social/economic issues pertaining to the downtown district, and a low supply of new listings in most neighborhoods – generally much lower for houses than for condos. Total sales volume plunged, while for many prospective sellers, the motivation to move was reduced by the mortgage lock-in effect. With interest rates falling, media coverage turning more positive, AI companies expanding in downtown, and economic conditions and consumer confidence rebounding, the direction is trending positive for San Francisco real estate.
January 2024 Market Report:
San Francisco Real Estate January 2024 Report
After the big decline in November and December, interest rates have basically been flat for the last five weeks:
It's hard to overstate the rebound in stock markets seen since late October 2023. The S&P has hit a new high, and the Nasdaq is getting very close. This has had an enormous effect on household wealth and consumer confidence, especially in more affluent households, who make up a very large percentage of prospective home buyers and sellers in the Bay Area. Psychology - optimism or pessimism about the future - plays an enormous role in the housing market.
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