2023 was a year for shocking headlines, potential indications for a recession, a suppression of home sales and rising interest rates. But what San Diego saw as a whole is that home pricing is continuing to remain strong. So given the current landscape, what will the 2024 housing market bring? Our analysis strives to equip you with the insights necessary for navigating sale and purchase decisions, from the effects of mortgage interest rates to the impact of inventory on pricing dynamics.
Markets Are Recalibrating
In December, the Federal Reserve’s projections of interest rates fueled a strong rally for stocks, bonds and global markets. With 11 hikes since 2022, we can now expect at least 3 rate cuts in 2024. Goldman Sachs also revised its projections, anticipating a 25-basis-point decrease in rates for the months of March, May, and June. Therefore, based on market projections, inflation will likely settle to the Fed’s target rate of 2%.
For the savvy investor, experts advise that:
- Current yields on cash may soon disappear.
- Bonds are more competitive.
- A soft landing for the economy—moderate inflation, solid growth, easier policy—looks to be a sweet spot for stocks.
- Real estate continues to be a dependable asset—and less expensive to obtain with lower rates.
Home Sellers Are Returning to the Market
With the sharp increase in interest rates we’ve seen over the last few years, a key challenge for the 2023 real estate market was that many potential sellers experienced ‘golden handcuffs’, unwilling to trade in their current home—and low interest rate—for a significantly higher price home and interest rate. As a result, new listings and supply were down substantially nationwide.
However, at the end of December, there were 4,246 detached homes for sale in San Diego County, 95% higher than the 2,177 of December 2022. While in some cases, this higher inventory could mean buyers have more negotiating power, this trend is not necessarily a cause for concern. In fact, it could signal a return to a more balanced market, comparable to pre-pandemic levels (ex. 4,060 detached homes for sale in December 2018). With borrowing costs easing, mortgage applications are ticking back up, more buyers will likely jump back into the market, and inventory may fall in its typical cyclical nature (unlike the extremes seen throughout the pandemic).
Existing Home Sales to Pave the Way
Last year saw the most suppressed number of housing trades since at least 2008, and overall, the current market looks a lot like it did in late 2022. But 2024 has one thing that 2023 did not: an optimistic outlook on rate cuts. This is supported by the uptick in existing home sales in November and December, breaking a five-month, consecutive streak of declines.
Lawrence Yun, Chief Economist for the National Association of Realtors, predicts existing home sales to increase 13% in 2024 for a total of 4.71 million homes sold nationwide. This will lead to further reinvigoration of the market, a good sign for buyers and sellers.
San Diego Forecast to Be 4th Strongest U.S. Real Estate Market in 2024
Realtor.Com’s latest forecast agrees, especially for San Diego. Ranking by an area’s expected growth in home prices combined with total sales volume, Realtor.Com predicts an 11% increase in home sales, with the median sales price rising by 5.4%.
We’ll dive into more summaries and predictions in the following pages so you can make the most educated decision for your own personal real estate goals in the coming year.
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