NAR updates annual economic forecasts for 2023 and 2024

Washington – Pending home sales in the south rose 0.7% to 87.1% in September, according to the National Association of Realtors (NAR), but that decreased 10.7% from last year in September.

All four U.S. regions had year-over-year declines in transactions.

Key Highlights:

  • Pending home sales increased in September, up 1.1% from August. Month over month, contract signings increased in the Northeast, Midwest and South but decreased in the West.
  • Pending home sales fell in all four U.S. regions compared to one year ago. 
  • Pending home sales across the board changed 1.1% in September. The Northeast and Midwest posted monthly gains in transactions while the West experienced a loss.

“Sales are expected to turn positive by early next year, with affordable regions and fast job-creating markets in better positions to recover, led by the Midwest and South,” added Yun.

The West index declined 1.8% in September to 55.3, dropping 12.9% from Sept. 2022.

“Despite the slight gain, pending contracts remain at historically low levels due to the highest mortgage rates in 20 years,” said Lawrence Yun, NAR chief economist. “Furthermore, inventory remains tight, which hinders sales but keeps home prices elevated.”

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – rose 1.1% to 72.6 in September. Year over year, pending transactions declined 11%. An index of 100 is equal to the level of contract activity in 2001. 

NAR forecasts that the 30-year fixed mortgage rate will average 6.9% for 2023 and decrease to an average of 6.3% in 2024, while the unemployment rate will lower to 3.7% in 2023 before increasing to 4.1% in 2024. NAR also predicts existing-home sales will decrease 17.5% in 2023, settling at 4.15 million, before rising 13.5%, to 4.71 million in 2024. Compared to last year, national median existing-home prices are projected to remain stable in 2023, edging higher by 0.1% to $386,700, before increasing by 0.7% next year, to $389,500.

Housing starts will drop 10.4% from 2022 to 2023 to 1.39 million before rising to 1.48 million or 6.5%, in 2024. 

“Because of homebuilders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates. This underscores the importance of increased inventory in helping to get the overall housing market moving,” said Yun.

NAR expects newly constructed home sales will grow from last year by 4.5% in 2023, to 670,000, because of additional inventory in this market segment and increase by another 19.4% in 2024, to 800,000. The national median new home price will drop by 5.9% this year, to $430,800 and improve by 3.5% next year to $445,800.

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