Going into 2023, with mortgage rates having already doubled from the year before, and continuing on an upward trajectory, there weren’t many industry experts making bullish predictions about the real estate market. Still, there was optimism that the year would at least see stability in home prices, if not the strong gains we had seen the 15 years prior. And for the most part – that’s what we got. Home prices actually saw modest year-over-year gains nationally, and the same held true here locally, with prices growing a fraction of a percent across San Mateo and Santa Clara Counties.

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Now, having hopefully weathered the worst of the storm with interest rates, industry experts seem more confident in home prices moving forward. The Home Price Expectation Survey (HPES) from Pulsenomics is a great resource to show what experts forecast for home prices over a five-year period. It includes projections from over 100 economists, investment strategists, and housing market analysts. And the results from the latest quarterly release show home prices are expected to go up every year through 2028 (see graph).

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While these projections may seem modest compared to what we’ve grown accustomed to in the Bay Area, remember that home price appreciation is cumulative. To put these projections into perspective – in San Mateo County, where the median sales price for a single-family home was $1,820,000 in 2023, these 5 years of growth would equate to an average of over $325,000 in equity appreciation. And when you consider that your initial 20% down payment on that purchase price would have only been $364,000, these returns begin to look a lot more enticing.

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However, consumer sentiment hasn’t quite caught up to industry expectations. A recent poll from Fannie Mae showed that 23% of consumers still expect prices to fall in the next 12 months, a fear that could continue to keep some buyers at bay in the early part of the year. In that case, motivated and prepared buyers could see less competition for their dream homes in the early part of the year.

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Have real estate goals you hope to achieve in 2024? The RealSmart Team is here to guide you. Let’s get the conversation started: (650) 363-2808