CHICAGO (WLS) -- After two years of sharp declines, the National Association of Realtors expects sales of existing homes will improve in 2024.
And this past week, the average long-term mortgage rate dropped below 7%, its lowest level since August.
That may be welcome news to people who have been reluctant to buy a new home because of the high cost of borrowing money.
In October, home sales nationwide fell to a 13-year low.
Andrew Howley is a broker associate with Berkshire Hathaway HomeServices Chicago.
"The Chicagoland area right now is having similar to what the rest of the country's having: We've had a sharp decline. In fact, we've actually seen an almost 35% decline in home sales since the peak in 2021. I think that's due to, really due to, the sharp increase in interest rates. That has caused a lot of the supply to dry up. And so we don't have that many homes for sale anymore," he said.
The National Association of Realtors is feeling optimistic about 2024.
"Very optimistic actually: This week, only a couple of days ago, the chairman of the Fed came out, and he said, not only are they not anticipating price increases in interest rates, they're actually expecting up to three cuts next year, and that's going to do a lot of things for the real estate market. Firstly, it's just going to make owning a home less expensive. Same-priced home costs less each month, which I think is really important," Howley said. "For sellers, what I'm really hoping we see is a lot of these sellers who are struggling to get their home on the market because they didn't want to make that transition. I'm hoping to see them list their homes. And that will ease some of the supply concerns that we're having right now."
Annual inflation fell to 3.1% in November. The U.S. Labor Department said on Tuesday that was thanks in part to a steep drop in gas prices.
Then on Wednesday, Federal Reserve Chairman Jerome Powell said, "We're seeing inflation making real progress."
So what does all this mean for the economy and investing in 2024?
"Well, it's great news for the markets, as we saw last week with the market really bouncing, and the Dow Jones Industrial Average making an all-time high," said Chuck Carlson, CEO of Horizon Investment Services in Hammond. "This is exactly what investors want to see, this idea of a soft landing being generated by the Fed, and it looks so far to be successful at doing that. The setup for the market is very good going into 2024. And I think it can continue to rally, based on the trends coming down in terms of interest rates, inflation and corporate profits still holding up. And those are really the three main engines of sustained markets: interest rates, inflation and corporate profits. And right now they're trending in a favorable direction."
So what does he see as the biggest risk to the U.S. economy in 2024?
"I think the biggest risk for the market in 2024 is, in fact, if a recession does happen. There's still a lot of people calling for a recession in 2024. Right now, the indicators we use, one being the Dow Jones Transportation Average, which is probably the most economically sensitive index there is in the world, is not indicating that there's going to be a recession in 2024. On the other hand, if you saw the Dow Transports go below their October low, all bets are off on that," Carlson said.