While 2023 threw some challenges at the real estate industry, NAR Chief Economist Dr. Lawrence Yun believes real estate in Pennsylvania will see positive changes this year. In a PAR webinar, Yun and PAR President Preston Moore discussed the 2024 housing market forecast for Pennsylvania Realtors® and homebuyers and sellers.
Yun shared that Pennsylvania data has been very similar to nationwide data. In November, nationwide home sales were up nearly 4% year-over-year, putting 2023 on track to be the third-best year since the 2008 economic recession.
Across the country, lack of inventory was a problem many homebuyers faced last year. The inventory of existing homes remained low as sellers avoided listing their homes and forfeiting their lower-than-today mortgage rates, which remained high for most of 2023.
“Home prices are remaining firm because of lack of supply,” Yun added. While builders are seeing an increase in business conditions now, building new homes can be a time-consuming process from start to finish. Builder inventory is much smaller compared to existing home inventory.
“Pennsylvania is actually doing a little better than the nation. Pennsylvania is very affordable. The affordability is at least allowing middle-class Americans a little better chance at homeownership in Pennsylvania,” according to Dr. Lawrence Yun, NAR chief economist.
Yun attributed the COVID-19 pandemic to many of the recent housing market and economic challenges, saying that while some Pennsylvania cities are above since pre-COVID, many smaller communities are still recovering from its effects regarding housing and employment. However, 5 million more Americans nationwide are working now compared to pre-COVID, and Yun sees that number further increasing in the future. Pennsylvania specifically has seen a 2.3% increase in job gains from March 2020 to November 2023.
“Pennsylvania is actually doing a little better than the nation,” Yun noted. “Pennsylvania is very affordable. The affordability is at least allowing middle-class Americans a little better chance at homeownership in Pennsylvania.”
“In the past three years, home prices in Pennsylvania have risen by 41.5%,” Yun said. “This is one of the fastest price gains in Pennsylvania history. We have not seen home prices rise this strongly and in such a short time span.”
Mortgage rates have lowered from an average of 8% to under 7% since October. Today, the average mortgage rate is 6.7%, and Yun is optimistic about the rates for 2024. He predicts that mortgage rates will decrease more this year but remain above 6% and that inflation and rent will lower as well.
With more reasonable mortgage rates, Yun believes more people will be willing to sell their homes and existing home inventory will increase, resulting in more home sales. He predicts home prices will remain stable in 2024 with minimal change in either direction, and he sees wages eventually rising to catch up with home prices.
As for commercial real estate, Yun shared that while the suburbs have been relatively fine, the cities have been a mixed bag. Retail trends have been moving from stores such as bookstores and toy shops to spaces offering services, such as yoga studios and nail salons. Office spaces have also seen a significant change, and he believes the market will see another two years of downturn for these as leases expire and are either renewed for less space or not renewed at all as workers go fully remote.
“Overall, Realtors® experienced a couple of years of difficulty, but that difficulty, I think, is past now,” Yun said in his final remarks. “We are already seeing some positive trends in 2024. We know it’s going to be positive. How much positive, there’s some uncertainty. I think you know there’s been suppression of housing demand due to lack of inventory, but steadily, with more supply and more buying, all that would generate more business opportunity in 2024 and beyond.”
To hear more about Yun’s 2024 housing market forecast, view the webinar recording on PAR’s website.