Chief Economist Danielle Hale appeared on last week’s episode of the Knowledge Brokers Podcast to discuss her predictions for 2024. 

As true knowledge brokers themselves, Tom Toole and Lisa Chinatti took this as a learning opportunity, asking about Hale’s predictions on a number of housing-related topics. 

Here, we’ll focus on these four in particular: 

  1. Existing home sales & mortgage rates
  2. Fed rate cuts 
  3. The luxury market
  4. Consumer confidence

Read on for some of the highlights. 

#1—Existing home sales, mortgage rates, and housing supply

In December, Hale shared’s predictions for the 2024 housing market, which included:

  • Home prices are expected to drop 1.7% year over year in 2024. That decline, combined with lower mortgage rates and income growth, should contribute to improved affordability. 
  • Mortgage rates will average 6.8% for the year, reaching 6.5% by the end of 2024. 
  • For sale inventory will drop 14.7% in 2024, while new construction and rentals provide alternative options for home seekers.
  • Home sales for 2024 will hold around 4 million, with a slight 0.1% uptick. 

Tom framed his first question by referencing the over/under housing market predictions he, Byron, and Lisa had made at the end of 2023. 

Basically, they set numbers for specific housing market indicators, and each voted “over” or “under” based on whether they believed the real numbers would be over or under those estimates. 

We had 4.25 million existing home sales in 2024 and an average 30-year fixed rate of 6.375% for the year nationally. Lisa and I both took the over on existing home sales and the under on rates. You have the complete opposite predictions….

Tom Toole

Hale explained her prediction of “under” for sales and “over” for mortgage rates. 

Given that we expected mortgage rates to be higher, it makes sense that our home sales projection is a little bit lower. When rates are higher, we tend to see less activity for two reasons: 1) because it’s more expensive for first-time homebuyers to get into the market, and 2) because we have this thing called the rate-lock phenomenon going on. I know your agents are very familiar with this…We expect that both of those phenomena will be important in 2024. And that’s going to help put some pressure on home sales, so we are expecting just $4.1 million in home sales for the year in 2024. It’s going to be roughly on par with where we ended 2023 we think.

Danielle Hale

Chief Economist for®

Given Hale’s forecast for existing home sales, the next questions centered on housing inventory for 2024. 

One of the things you mentioned clearly was the flat year-over-year sales. The other was that the inventory of existing homes would actually decrease…and [by] double-digit percentage  points… What do you think is going to lead to such a hefty decrease in the inventory with flat sales?

Lisa Chinatti

Hale’s answer referenced’s forecast regarding the lock-in effect and its continued potency, based on their mortgage rate predictions for the year.

I will say a lot of this is predicated on the mortgage rate forecast, which already, only one month into the year, mortgage rates have come in better than we forecast. But because we expected mortgage rates to be higher than they are already, we expected that lock-in effect to continue to be a really important factor for homeowners. And because that lock-in effect is going to keep people on the sidelines, we’re not going to have as much turnover in the housing market. And that means that the total inventory level…was going to be low

Essentially, we expected that mortgage rates would start to decline but remain relatively high. And as a result, 2024 was going to be relatively frozen.

Danielle Hale

Chief Economist for®

Hale went on to explain why she initially didn’t expect mortgage rates to come down enough to create a disruption in the current market dynamic—and how the current trend in rates could impact buyer urgency. 

After years of mortgage rates climbing and that upward pressure on rates becoming the norm, we think we’re going to shift to a downward trend, which is great news for the housing market but not so great from the perspective of buyer urgency. In an environment where mortgage rates are rising, every time there’s a dip in mortgage rates, people think, ‘Now’s my chance. I can jump in finally, catch a bit of a break before rates go higher.’ But once that trend shifts, and the big picture expectation is that mortgage rates are going to decline, we expect to see somewhat less buyer urgency in the market because that pressure of ‘Jump now, or you’ll miss your chance forever’ just isn’t there to the same degree.

Danielle Hale

Chief Economist for®

#2—Fed behavior and rate cuts

Tom brought up wildcard forces surrounding this year’s presidential election, as well as the geopolitical forces Hale mentioned in her report

From Hale’s answer, she doesn’t anticipate any substantial disruption arising from either forces. While she acknowledged the probability of an impact on the U.S. economy, she doesn’t expect the Fed will change its policy based on who wins the election or on what’s happening abroad. 

The Fed is supposed to be above influence from politicians and the political fray. And generally, for the most part, they have seemed to operate in that way. But there have been instances in the past where people sort of questioned the integrity of the Fed—not this current Fed but in the past. So, that is, I think, a risk, but I think it’s one the Fed is aware of. So, that’s not one that I’m worried about. I do think the Fed is really going to stick to what the data suggests is the right thing to do and to try, as best as possible, to ignore the election and noise happening around it… 

When it comes to policy, there are some pretty divergent opinions on what the right policy is for lots of different items in the U.S., as far as infrastructure goes, trade policy, domestic security. So, there are lots of potential outcomes as a result of the election, and I think that those will have economic consequences…

Danielle Hale

Chief Economist for®

While some economists are saying we’ll see six Fed rate cuts in 2024, the Fed is saying three is more likely. So, where does Hale weigh in on what we should expect in terms of rate cuts and other Fed behavior over the next 12 months? 

I’m expecting closer to three because I think the Fed is going to err on the side of being a little bit cautious and making sure that inflation is truly not going to have any chance of coming back before they start cutting rates. But we’ll see. I could be wrong about that. The market is certainly expecting a Fed rate cut in March. I think that would likely be too soon, and I would be surprised if that happened. But the market is definitely positioned for a Fed rate cut in March. 

There’s a gap between what the Fed says it’s going to do and what the market expects, and that’s going to have to close over the course of the year. As that closes, we’re likely to see some volatility in mortgage rates, which does make things a little challenging for consumers. But at least, I think, the volatility is going to be tilted toward the downside this year instead of toward the upside, which is what we saw last year.

Danielle Hale

Chief Economist for®

Hale did have some advice for consumers regarding their plans to buy or sell in 2024, and this is worth passing on to potential clients when you’re talking to them about their best options in the current market. 

Something that I think is good advice for consumers in that market—because you just have to deal with the volatility, you can’t change it—I like to tell people there’s tons of mortgage calculators…run a bunch of different scenarios so that you already kind of have an idea of what mortgage rate fluctuations mean for your monthly costs and your budget.

Danielle Hale

Chief Economist for®

By doing this with a trusted mortgage lender, consumers can, in a way, rate-proof themselves, using these scenarios as a personal mortgage rate stress test. 

It makes sense to encourage your clients to get some clarity on the monthly costs associated with a specific range of mortgage rates. It reinforces the importance of focusing on monthly payments, which hit home a lot faster than an average percentage rate. 

#3—The market

Lisa then took advantage of a segue in the conversation to ask Hale about her 2024 forecast for the U.S. luxury market. No surprise it’s done better relative to the overall housing market, but Hale did point out an interesting observation. 

Luxury markets are an area that we have tracked off and on. I will say recently it hasn’t been a big focus of ours as much. But we do sometimes partner with different Dow Jones publications like Mansion Global to look at luxury data. Luxury markets have, in general, fared better. Luxury buyers have done okay over the last year. The stock market is back close to all-time highs. That tends to put luxury buyers in a good position and increase their interest in the housing market. 

One of the top markets was in Maine; the Portland area has done pretty well from a luxury perspective. But other markets that have surfaced over the last year have been interesting. They’re not necessarily the ultra-luxury areas but areas like Detroit or even parts of St. Louis, where luxury…is actually affordable, relative to the national context. So, it has been interesting. Even in the luxury market, there has been a bit more of an interest in affordability.

Danielle Hale

Chief Economist for®

#4—Consumer confidence and what factors are most likely to impact it

Also discussed were factors most likely to have the greatest impact on consumer confidence in the housing market this year. Given the resilience of the housing market, economists have revised their expectations regarding whether we should expect a recession or a soft landing. 

I think that economic confidence is really kind of fundamental, and so the fact that we’ve continued to see the unemployment rate come in at under 4%… People are still in a fundamentally good place. We still continue to see wage growth. That’s going to boost economic confidence, as well, and I think that is fundamental for the housing market…. 

Mortgage rates have been challenging. The Fed has had to raise rates; that’s translated into higher mortgage rates to squeeze out inflation. But generally, we’ve seen good progress on inflation. Just yesterday, the CPI data was out, and it was a little bit mixed. It was not a bad reading but it certainly wasn’t as good as it could have been… I don’t think it’s going to undermine confidence yet, but it is a little bit of a warning flag, so that’s something we’re going to be watching as we move into the month ahead to see whether we can get that improvement in inflation back on track.

Danielle Hale

Chief Economist for®

Watch the full episode for more.