- There’s lot of uncertainty about the economy, but most experts believe, and logic suggests, a slight slowing from 2023.
- There’s even more disagreement about the housing market: analyst forecasts are all over the map.
What should we expect from the economy in 2024? To tell the truth, no one knows. Most experts believe that the economy will slow down. That would make a lot of sense, since it was on fire in 2023. But economists have been expecting a slowdown in growth for some time. Remember the long-awaited recession of 2023?
In this post, we’ll explain the thinking behind the general consensus for 2024, and take a closer look at the housing market, which is even more of a wildcard. Then you can decide whether you agree with the “experts” or not!
Looking back, looking ahead
First, a look back: U.S. employers added 2.7 million new jobs in 2023, capping a three-year stretch that was the best since the 1990s. The unemployment rate stayed extremely low, as shown in the chart below.
The measure of economic growth known as GDP (Gross Domestic Product) was a roaring 4.9% in the third quarter, the most recent data available. And the S&P 500 gained nearly 25% during the year.
Those are all impressive metrics, and it would be hard for any country’s economy to sustain that kind of growth for an extended period of time.
What’s more, all the forces working against the economy that led many analysts to fear a recession in 2023 are still with us. Americans have less disposable income than they did a few years ago, since COVID payments have been spent and student loan payments have resumed. There’s a lot of uncertainty about geopolitics: last year, it was the war in Ukraine, and this year, the conflict in the Middle East has been added to that list. Inflation seems to have been tamed, but prices are still higher than they were before the pandemic.
All of it adds up to a very uncertain outlook for the year ahead. As the economics team at JP Morgan put it in a recent forecast, they are “hoping for a boring 2024.” (If you’re curious about the specifics, they expect GDP growth of 2% throughout the year, 2% inflation, and unemployment at “roughly” 4%, a tick higher than it was in 2023.)
Housing market stabilization
Some of the factors that may help make the outlook “boring” may also help stabilize the housing market. If the Federal Reserve is indeed done raising interest rates, as many experts expect, interest rates will start to come down.
Mortgage rates aren’t controlled by the Fed, but they follow the ones that are. And if mortgage rates fall, it should make it easier for people to buy homes and may lead homeowners to feel more confident about listing their homes for sale.
While most experts are fairly confident in saying that interest rates have peaked for now – if not predicting where they’ll settle – there’s less agreement on other aspects of the housing market.
The Mortgage Bankers Association expects a whopping 22% increase in home sales in 2024, according to an analysis by the Urban Institute, but Fannie Mae thinks sales will be only fractionally higher.
“Mortgage rates are expected to gradually ease throughout the year but remain in the 6% to 7% range. While lower rates will help alleviate affordability issues, they will not be low enough to pull substantial inventory of existing homes into the market,” wrote the economists at Freddie Mac in December. “Thus, the home sales market in 2024 will look similar to 2023.”
The National Association of Realtors, meanwhile, forecasts home sales will rise 13.5%, even though its chief economist expects mortgage rates to average a still-high 6.3%.
What’s a homeowner to do?
With all the uncertainty, one thing is clear. Anyone considering buying, selling, refinancing, or taking equity out of a home should stick to the fundamentals rather than trying to time the market. What’s right for your situation? Arm yourself with as much data and background research as you can, and then pull the trigger on whatever solution might work for you.
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