Gloomy Outlook for Housing Market in Latest Forecasts

Elevated mortgage rates are poised to deter sellers of pre-owned homes into the next year, with Fannie Mae forecasting a sales “bottom out” in early 2024, followed by a rebound in the subsequent year.

Mortgage Rates

As of October, mortgage rates were hovering near 8 percent, reaching the highest level since the turn of the millennium. This surge has prompted existing homeowners to shy away from selling, opting to retain lower rates secured in previous years. Described as the “lock-in effect” by Fannie Mae analysts, this phenomenon has further diminished the supply of available homes for buyers, contributing to a price uptick. In October, prices for pre-owned homes surged by 3.4 percent to a median of approximately $392,000, marking the fourth consecutive annual increase, according to the National Association of Realtors. However, this price hike coincided with a sales dip of over 4 percent.

Home Sales May Go Low:

Fannie Mae anticipates existing home sales to hit a low of 3.9 million in the fourth quarter of 2023, marking the lowest point in over a decade. Doug Duncan, Fannie Mae’s chief economist, remarked, “Housing has been and continues to be under serious affordability pressure, resulting in recessionary-level home sales activity.” Despite this, he expressed optimism, stating, “While many current owners with low mortgage rates will likely continue to be discouraged from listing their homes, we expect mortgage rates to trend modestly downward in 2024, which should help kickstart a gradual recovery in home sales into 2025.” 

However, the Greater Chattanooga Association of Realtors recently compiled sales data paints a somewhat different picture of the Chattanooga market. Despite a 13.7% year-over-year drop in home sales during the first 10 months of the year, October witnessed a nearly 3% increase in home sales compared to September.

Chattanooga’s October Sales:

In contrast to the nationwide trend, Chattanooga’s completed home sales in October demonstrated a more resilient performance, with a modest 3% decline from the same month the previous year. This contrasts sharply with the National Association of Realtors’ data, which reported a substantial 14.6% decline in home sales across the country during the same period.

In a market grappling with the impact of higher mortgage rates and soaring prices, October saw previously owned U.S. home sales hit a 13-year low, reflecting the hesitancy of potential buyers. However, a closer look at the Chattanooga market reveals a more optimistic scenario. Despite a year-over-year decrease of 13.7% in home sales for the first 10 months of the year, Chattanooga experienced a nearly 3% surge in October sales compared to September. Remarkably, Chattanooga’s 3% decline in completed home sales last month stands in stark contrast to the national scenario, where the National Association of Realtors reported a substantial 14.6% dip in home sales.