Logan Mohtashami’s 2024 housing market and rate forecast

The 2023 housing market faced one of the same roadblocks we saw in 2022: mortgage rates were too high for home sales growth. Now that we’re in 2024, the Federal Reserve‘s rate hike cycle is over, so let’s look at what that means for housing demand and home prices. However, a yearly forecast has limitations and in this crazy housing and economic cycle, if people give you a yearly forecast without guidance as variables change, you’ll be dealing with stale data. Every Saturday I publish a weekly housing market tracker with forward-looking data and insights so you can adjust quickly to market conditions.

Here’s my forecast for 2024:

10-year yield and mortgage rates

For 2024, the 10-year yield range will be similar to 2023, but with a few different variables to watch.

• 10-year yield range: 4.25%-3.21%
• Mortgage rates: between 7.25%-5.75%

A key level to watch for the 10-year yield is 3.37%. To go below this level last year, labor would need to break, so I borrowed Gandalf the Grey’s catchphrase: “You shall not pass.” And the 10-year yield did not pass that level in 2023!

However, if the labor or economic data gets weaker, we can break through that Gandalf line, which means 2.72% on the 10-year yield is in play for 2024. This could mean sub-5% mortgage rates if the spreads get better — a win for the housing market.. If the spreads are still bad, mortgage rates will be between 5%-6%. If the 10-year yield gets above 4.25%, the U.S. economy has outperformed again, as it did in Q3 when it grew at 5% and jobless claims fell.

Here is a chart of the 10-year yield with the inflation growth rate data tied to it for 2023:

Now let’s talk about mortgage rates!

The spread between the 10-year yield and mortgage rates can get better in 2024, which means mortgage rates could be 0.625% to 1% lower next year. For example, mortgage rates would be under 6% today if the spreads were normal. Instead, they closed 2023 at 6.67%. If the spreads get anywhere back to normal and the 10-year yield gets to the lower end of the range in 2024, we can have sub-5 % mortgage rates in 2024.

With the Fed no longer in hiking mode, any economic weakness on the labor side is a better backdrop to send mortgage rates lower. Unlike 2023, this year there are more positive variables that could send mortgage rates lower rather than higher.

Home prices

If everything stays constant, 2024 home-price growth levels will repeat what happened in 2023: low single-digit national home-price gains.

What could make home prices grow faster than low single digits? If I am wrong and mortgage rates go lower for longer and we don’t get more new listings in 2024, then home prices can grow faster in 2024 because we will have the same issue as before: too many people chasing too few homes.

What could make home prices decline? This would happen if we saw a surge of stressed inventory and mortgage rates didn’t go low enough to handle that much new…