NAR Chief Economist Lawrence Yun recently addressed a group of real estate professionals in White Plains, discussing the challenges faced by the real estate market in 2023 and his outlook for 2024:
Yun acknowledged that 2023 has been a tough year for the real estate market, primarily due to high interest rates, inflation, and a shortage of housing inventory.
Residential sales were down by 21% as of July 2023 compared to the previous year, and they remained below pre-COVID levels.
Commercial real estate also faced difficulties, with high interest rates affecting transactions and prices.
Yun expressed concern about community banks facing a crisis due to an interest rate mismatch and high commercial real estate loan exposure.
He estimated that around 2,000 of the approximately 5,000 community banks in the U.S. might be in trouble due to these conditions.
Yun pointed out that the inflation rate, which spiked to 9% in 2022, has trended down to 3.7% in August, near the Federal Reserve's target of 2%.
He suggested that the Fed should pause further rate hikes to allow the economy to stabilize.
Yun also predicted that lending rates would likely be in the mid-6% range by the spring of 2024.
Lower interest rates are expected to lead to more listings and buyers entering the market.
He highlighted demographic factors, such as newborns, marriages, divorces, and job changes, as potential drivers for an improved market outlook.
Yun expressed optimism that 2024 would be a better year for the real estate market, although it might still fall short of pre-COVID conditions.
In summary, Yun highlighted the challenges faced by the real estate market in 2023, primarily driven by high interest rates, and provided insights into the potential improvements and demographic factors shaping the market in 2024.
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