Housing Forecast 2024. How Big Is The Housing Plunge This Time?
I’m going to share with you the 2024 housing predictions or the housing forecast. If you clicked on this video, you are a buyer or you are a seller and wondering what the heck is going on with this market.
It is certainly an uncertain market. Is this a good time to buy if you’re a buyer, is this a good time to sell? If you bought your house in the last two or three years, you’re wondering, am I going to get stuck in this video? So in this video, let’s talk about some numbers. And I also wanted to caution with you that there’s a lot of misinformation out there, especially on YouTube. Since you’re watching this video, I’m sure you’re watching other videos as well on YouTube, all good for you.
But also remember that there’s a lot of YouTubers, what we call negative YouTube channels, and they give you misinformation confuse you, and give you fear-based information so they get their views that they want. In this video, I’m going to give you the exact numbers and the data, not my opinion, but actual data coming from Fannie Mae and the National Association of Realtors and Mortgage Bankers associations. So let’s get right into the numbers and let the numbers do the talking.
One of the reasons that people are scared, consumers are scared, buyers, and sellers, is because they distinctly remember the 2008 crash. So before I give you what’s happening in 2004, and 2005, based on these numbers, let’s look at what happened in 2008 and why this is different than 2008.
First of all, in 2008 there were too many homes for sale. There was a ten-month supply of homes for sale. If you compare it, in today’s market, there’s only a three-month supply of homes for sale, which means that if no new homes come on the market for sale, it’ll take only three months to sell on average.
That’s one fact. So the inventory is low right now. That’s a given fact. And you can tell because there’s still multiple offers and multiple biddings going on. Yes, even with the high-interest rate and the high home prices going on right now. The second thing we have to look at is in 2008 the unemployment was 8% or higher. If you look at it, currently it’s three or 4%, which is half the unemployment rate, which is good news because in 2008 people could not afford to buy a house because a lot of them did not have jobs or were about to leave jobs or were about to get fired with the recession.
One of the distinct features of a housing market crash in 2024 versus, let’s say, 2008, is that in 2008, there was zero equity in the homes. Consumers, homeowners refinanced and refinanced and refinanced. And what did they do with that money? They bought boats, they bought horses, they bought bigger houses, they spent the money on vacations, on food, and they just blew that money away, threw that money away. After that lesson, a lot of the people who have equity, in fact, right now we have so much equity, it’s unbelievable. And I’ll give you the numbers towards the end of this video of how much equity there is. So current market, there’s a lot of equity. In 2008, there was zero equity. The other distinct feature of why there was a recession and why a lot of people lost homes to foreclosures is because the sellers refinanced and they got toxic loans.
They bought homes in 20 04, 20 05 20 06 and there’s a saying that if you had a driver’s license and a paycheck, you got a loan. Banks did not care. They were giving out toxic banks, not all the banks, but there were some banks and lenders giving out loans to people who did not deserve to get loans, financially speaking. So that was one of the biggest factors why there was a recession. So let’s look at the current numbers and see what’s going to happen in 2024 and beyond.
According to the National Association of Realtors, Fannie Mae, and MBA Mortgage Bankers Association, they are predicting a rise in home prices for 2024. 2025, yes, I said that right, an increase in home prices. One would figure that with the high inflation rate that we’ve had, as high as 8%, it has come down. We had an interest rate just a few weeks ago at 8%, and it’s currently around 7.5%. With the home prices being so high. They’re not just high, they are very high. So you figure with those high-interest rates, high prices, and high inflation, one would figure there’ll be a drop in home prices. But guess what? In 2023, we saw an increase in home prices from 2022.
The prediction was that they were going to drop. They did not drop. They went up anywhere from 2 to 3% on average nationwide. And now these companies or organizations are saying that there’s another increase anywhere from 2.9% to 6% to 1.5% increase on average, one to 3% increase in home prices, despite the current factors. So the prediction is prices will go up and not down. So that’s the prediction, and you can see that on this chart. The other forecast from the same companies and organizations is that the number of home sales is going to increase.
Yes, the number of home sales are going to increase. As you may know, in 2021, according to the National Association of Realtors, there were over 6 million homes sold. In 2022, the number of homes dropped to anywhere from five to five and a half million homes sold, which was quite a drop. And in 2023, they are predicting, of course, we don’t have the data yet, but they’re predicting the number of home sales will be depending on how we finish December 2023, home sales anywhere from 4.5 to 4.8 million homes sold nationwide. So there was a significant drop from 6 million to about 4.8 million homes. And of course, the reason is because a lot of the buyers could not afford homes, or they just didn’t want to buy homes, they didn’t want to pay the high-interest rate, and the inflation was too high for them to qualify for a loan.
But now MBA and Fannie Mae and Nar are expecting an increase in the number of homes for sale, even in this condition. Figure that one out. One of the other things that happened when it comes to not home sales, but home renting, as you know, as the home prices went up, rents have gone up. Also, for the last six, or seven years, there has been an average increase in rents anywhere from three to 5% nationwide. It could be 3% in some areas. It could be 5% in some areas.
But they have been going up and up and up and up on a steady rise. And people are still renting. People have to stay. People want a roof over their heads. Of course, food, shelter, and clothing. Shelter comes in second after food. So despite the high rents, and I should not say high despite the ridiculous rents, people are still renting. In Orange County right now, a two-bedroom, two-and-a-half-bath condo is going for $2,500 a month or 3000 a month. And if it comes on the market, even today, as of November 2023, there are multiple applications on it. Five applications, 30 applications. So there is a big dash towards renting, even with the high rates, similarly with the housing, even in this market, November 2023, when a good property comes on the market with a good location, good price, and when I say good price, market price, as of today, there are multiple bids. Of course, that’s not happening nationwide, but in a lot of areas there have been multiple bids. So even with these higher prices, people are buying and dying to buy houses at seven and a half, 8% interest rate at the peak prices. So what I’m maybe trying to say is that maybe there isn’t a recession coming based on this activity, which is the current activity as of November 2023. So let’s wait and see.
And one of the biggest reasons there may not be a housing recession or a housing crash is because of two significant reasons. One is obviously there’s a shortage of inventory. So the recession is there when there’s too many homes for sale and people are not buying homes right now, people are buying homes and there’s a shortage of inventory.
And the second reason is there is so much equity. So much equity. Let’s look at this chart, just to give you briefly. It shows that 50% of all the homes in the USA have their homes free and clear. And then almost 32% of the people who refinance or have loans have more than 50% equity in their home. And there’s about 30% of homeowners have equity, which is less than 50%, but they still have equity.
So with so much equity, how can there be a housing crash? Because even if people lose jobs and cannot pay for a year and they get behind on payments when they sell the home, they’re going to come out ahead and even get a check from selling their home. So with these numbers, it’s hard to say there’s a market crash. If there is a crash, it’s going to be very slow, very mild, and maybe won’t be here till 2025. But based on the 2023 numbers, there doesn’t seem to be a housing crash yet.
If you are a buyer or a seller, then there’s one thing you don’t want to do that nobody can do and nobody has ever done. So in the last hundred years that I’ve seen history of so is that don’t predict the market, don’t chase the market, don’t try to read the market. A lot of the buyers wait and say I’ll buy when the interest rates are low. Well, great, what if the interest rates go up? Or what happens when the interest rate goes down to 5.5% from 7.5% and you’re a married couple and one of you does not have a job and get laid off?
You can’t buy a house. So there is no way you can predict the market. Nobody has been able to do it. Certainly not the average consumers like you and me. We don’t have all the data and we cannot chase the market. The best time to buy or sell is when you are ready, willing, and able to buy. Can you afford a house in this market at a peak price? In Anaheim Hills, for example, in Orange County, the median price is about a million dollars. So in this market, if you can afford to buy the house, if you’re willing to buy a house because your family is growing or you had a relocation and you want to move out here and are willing to pay the price, that’s fine.
And are you able to make the payments? Are you qualified? If you can do so, buy it now. So let’s say you buy for 7.5% and you’re not chasing the market, or let’s say you are chasing the market and say I’m going to wait till it drops. But what if it goes up? But if you buy the house at 7.5%, at a million dollars, several things will happen and that’s what you have to think about. One is that your rates may go up. So you are lucky that you bought at 7.5% and not at 8.5%.
The second thing that could happen is that the rates may go down. It went down from 7.5, for example, down to 5.5, then you can refinance to your advantage. So that’s a good thing. And the last thing that could have happened is that you bought it at 7.5, you bought it at a million dollars.
You were able to buy, you had the job, and now you have started your two clocks, which is to your advantage. And what are those two clocks? The one clock is that you’re starting your 30-year payment, assuming you have a 30-year payment. So that clock has started, and you want to get rid of that clock in 30 years or sooner by paying the extra mortgage. And I have a video on that. I’ll put a link on it towards the end of this video, paid off faster. And the second clock that you’re starting is your appreciation clock.
On average, if you look at the four-year history, on average, the home appreciates anywhere from three to 5%, depending on where you are. So, yes, maybe you are buying at peak right now, maybe in the next three, four, five years, it may drop. Your house from a million dollars, may drop to $850,000. But if you’re staying there for the long term, eventually in 20 years, in 30 years, your house will be worth $2 million if you see an average of three to 5% per year. So if you are willing, able, and ready to buy, start your 30-year clocks. Never chase the market. Nobody has been able to do that. You buy when you’re ready, start your two clocks, and also get your tax advantages. I also did a video just last week. It’s called a wave of foreclosures. So you may want to check it out because I talk about other numbers. So watch both these videos. You will have a lot more information, and you’ll be ready to buy or sell in any market.