Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again?

Even if mortgage rates are currently lower than they were in the autumn and analysts predict more rate reductions in 2024, the difficulties associated with house affordability won’t go away anytime soon. Many people—mostly first-time buyers—remain gloomy about being able to purchase a home as we approach 2024 due to a perfect storm of historically low housing supply, still high mortgage rates, and rising home prices.

Housing Market Forecast for 2024

A depressing year for many would-be homeowners was 2023. A perfect storm of house unaffordability was created by rising mortgage rates, residential real estate prices, and average monthly mortgage payments that reached record highs.

But for other people, 2024 would be a better year to buy a house.

Sam Khater, chief economist at Freddie Mac, stated in a news release that “we anticipate a busier spring home-buying season than 2023, despite persistent inventory challenges.” He did, however, observe that house prices will probably keep rising “at a steady pace.”

However, other analysts predict that the number of homeowners who will be “locked in” at low rates will retain a tight grip on inventories and drive up home values, meaning that housing market activity would remain muted into 2024.

In an email, Realtor.com economist Jiayi Xu said, “[G]iven that roughly two-thirds of outstanding mortgages currently boast rates below 4%, a notable portion of existing homeowners may opt to postpone their buying and selling plans and wait for the potential for even lower rates before making decisions about their next residences.”

The majority of industry analysts concur that the Federal Reserve has completed its rate-hiking programme in an effort to reduce inflation in the interim. On January 31, policymakers maintained the federal funds rate at its current level for a fourth consecutive meeting and hinted that rate reductions may occur in 2024.

The benchmark interest rate that banks charge one another for overnight loans is known as the federal funds rate, and it often has an indirect impact on mortgage rates.

Pent-up demand and low inventory supporting house prices mean that real estate observers expect affordability issues with homes to endure even with the possible rate reduction.

As such, Mark Fleming, chief economist of First American Financial Corporation, forecasts an impending “flat stretch.” Fleming predicted that the housing market in 2024 would not be perfect, saying that if it was too hot in 2020–2021, it would likely too chilly in 2023.

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Will the Housing Market Finally Recover in 2024?

According to Gumbinger, a number of things need to happen before there is a housing rebound. “We would first need to see inventories of homes for sale turn considerably higher,” Gumbinger argues, in order to get the greatest potential result. “The upward pressure on home prices would be lessened by this additional inventory, levelling off or possibly even helping to settle back somewhat from peak or near-peak levels.”

Naturally, mortgage rates would also need to drop. Fortunately, this is finally starting to happen, with rates falling towards the end of 2023 and remaining around 7% thus far in 2024.

Gumbinger warns against assuming they will calm off too soon. Quick rate drops might lead to a demand spike that erases any increases in inventory, driving up housing prices.

It is preferable, according to Gumbinger, for rate reductions to occur gradually over time, enhancing buyer options rather than all at once. In addition, he says that mortgage rates going back to a more “normal” upper 4% to lower 5% range will eventually aid in the housing market’s recovery to levels seen in 2014–2019. However, Gumbinger believes it could take some time for us to go back to those rates.

However, Kuba Jewgieniew, the CEO of brokerage Realty ONE Group, is hopeful that this year will see a resurgence. “As interest rates begin to stabilise around 6% or even lower in 2024, we’re definitely looking forward to a better housing market,” Jewgieniew adds.

Housing Inventory Forecast for 2024

Demand for housing is still higher than supply, and it probably will be for some time to come since many homeowners are “locked in” at low loan rates or are hesitant to sell because of high home prices. “Until mortgage rates are back down in the low 5% range, I don’t expect to see a meaningful increase in the supply of existing homes for sale, so probably not in 2024,” says Rick Sharga, the founder and CEO of the market research and business advising firm CJ Patrick Company.

Since there are still relatively few homes available, particularly for entry-level buyers, demand has been maintained and extremely high prices have been maintained.

But there are encouraging signals coming again.

For starters, the prognosis for house builders, which had been dropping, is now heading upward due to stronger building conditions and declining mortgage rates.

Building industry mood is measured by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which increased from 37 to 44 in January. When the value is 50 or above, more builders anticipate favourable circumstances for new building.

In December, however, new single-family construction permits managed to grow marginally, marking the eleventh consecutive month of gain, according to the most recent statistics from the U.S. Department of Housing and Urban Development (HUD) and U.S. Census Bureau.

Residential Real Estate Stats: Existing, New and Pending Home Sales

December saw the housing market continue in a deep freeze, however there may be a slight thawing soon. Here are the findings from the most recent statistics on home sales.

Existing-Home Sales

December saw a slowdown in sales of existing homes, down 6.2% from the previous year and 1% from the previous month. According to the most recent monthly National Association of Realtors (NAR) data, existing-home sales finished 2023 at a 28-year low of 4.09 million.

At the same time, median home prices soared in 2023 to a record high of $389,800.

According to Lawrence Yun, chief economist of NAR, “the latest month’s sales look to be the bottom before inevitably turning higher in the new year.” “Mortgage rates have significantly dropped from just two months ago, and additional inventory is anticipated to hit the market in the coming months.”

New Home Sales

In the meantime, customers dissatisfied with the dearth of resale inventory were being drawn to new construction. December sales of newly built single-family houses increased by 8% over November and by 4.4% on an annual basis, according to the most recent statistics from the U.S. Census Bureau and HUD.

Pending Home Sales

Even if existing-home sales were sluggish, data on pending purchases gave hope for a comeback in 2024. In December, the Pending Homes Sales Index increased by 8.3% over the previous month. Future sales of existing homes are predicted by pending sales.

According to Yun in the research, “the housing market is off to a good start this year, as consumers benefit from falling mortgage rates and stable home prices.”

Yun did point out that a significant rise in the inventory of previously owned homes is necessary to sustain the surge in demand that analysts believe falling mortgage rates would cause.

Between November and December, the inventory of unsold resale homes fell by 11.5% to one million, leaving the current home stock at a meagre 3.2-month supply at the current sales rate. A balanced housing market, according to many analysts, has a four- to six-month supply.

Home Affordability Optimism in 2024 Rises (Tentatively) As Mortgage Rates Recede

Prospective homebuyers expect that rates will continue to drop and relieve the affordability pinch, as the average 30-year fixed mortgage rate has dropped more than a full percentage point from its 2023 high of 7.79%. First off, according to Redfin, monthly mortgage payments are down 14% from their record highs in October, with the typical payment falling to $2,361 in December, capping the least inexpensive year ever for house purchasers.

In the meanwhile, the latest Fannie Mae Home Purchase Sentiment Index (HPSI) showed a sharp increase in mortgage rate optimism, with a survey-high 31% of respondents indicating they anticipate additional declines in mortgage rates. Even if consumers’ views on the affordability of homes are still pessimistic, cautious optimism is beginning to show: in the December data, 17% of consumers said that now is a good time to buy a home, up from a survey record low of 14% the month before.

Will the Housing Market Crash in 2024?

The probability of a housing market crash—a sharp collapse in unaffordably high home prices as a result of diminishing demand—remains low for 2024, even if several regions of the nation are witnessing monthly price decreases. “A market crash is prevented by the historically low number of available homes on the market,” states Tom Hutchens, executive vice president of production at non-QM lender Angel Oak Mortgage Solutions. Furthermore, analysts note that with many borrowers having significant home equity, today’s homeowners are in far better financial standing than those who emerged from the 2008 financial crisis.

“I anticipate that home appreciation will slow down in 2024, but it won’t completely collapse,” states Orphe Divounguy, senior macroeconomist at Zillow house Loans. This forecast matches the expectations of other observers of the property market. According to Comerica Bank’s senior economist Bill Adams, the country’s housing prices would grow 2.9% in 2024. This information was provided in an email. Additionally, Divounguy points out that a number of tailwinds will support housing demand in 2024, including the entry of Millennials into their prime home-buying years, income growth, and financial prosperity.

Nevertheless, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction houses, believes that a price collapse is still conceivable given the decline in sales, particularly in areas where real estate speculators have snapped up a large number of properties. Hnatkovskyy stated via email, “If something pushes that over the edge, the consequences could be severe.”

Will Foreclosures Increase in 2024?

Experts typically don’t anticipate a surge in foreclosures in 2024, even if the number of foreclosures is heading upward nationally. It is unlikely that foreclosure activity will return to 2019 levels until sometime around mid-to-late 2024, according to Sharga, who notes that it is now only at roughly 60% of pre-pandemic levels. Sharga says that the main causes of this are the robust economy—we continue to witness low unemployment and consistent salary growth—as well as the high calibre of loans. Foreclosures have decreased in part due to the recent, significant increase in homeowner equity brought forth by rising property prices.

According to Sharga, more than 20% of today’s homeowners have equity in their homes. Therefore, foreclosure auctions and lender repossessions should stay below 2019 levels even if there could be more foreclosure starts in 2024—partially because of the phase-out of Covid-era mortgage assistance programmes. “Looking ahead to 2023, we perceive the current surge in foreclosure proceedings as a correction in the market instead of a reason for concern,” stated Rob Barber, CEO of Attom, a company that provides property data, in a study. Foreclosure filings in December decreased 2% from a year ago and by 6% from the previous month, per Attom. In 2023, lenders started foreclosing on 270,222 homes, a 20% decrease from 2019.

When Will Be the Best Time To Buy a Home in 2024?

Purchasing a home is a very personal choice, regardless of the market. Considering that a person’s house is typically the greatest investment they will make in their lifetime, it is imperative to be financially stable before making a purchase. To determine your monthly housing costs depending on your down payment, use a mortgage calculator. But according to experts, this is definitely not the ideal home-buying method if you’re attempting to project what could occur in the upcoming year.

According to Divounguy, “the housing market—like so many other markets—is almost impossible to time.” “When a prospective buyer finds a home they like, that fits their family’s present and future needs, and that they can afford, that is the best time to act.” It’s difficult to advise prospective homebuyers to hold off until conditions improve, Gumbinger concedes. “It seems that home prices are usually on the rise, which means that the requirements for saving a down payment are constantly changing, and there’s no assurance that overall conditions tomorrow will be better than they are today.” According to Divounguy, it’s beneficial to “get on the housing ladder” in order to start accumulating equity and net worth.

Pro Tips for Buying in Today’s Real Estate Market

Move to a lower-priced housing market if you can switch jobs or work remotely

Get all your ducks in a row in advance so you can act fast—review your financial situation, gather required documents, shop multiple lenders and strengthen your credit score

Check prices and listings regularly to beat out the competition

Know how much your monthly payment will be—complete with taxes—and how well that fits into your budget

Pro Tips for Selling in Today’s Real Estate Market

Work with a real estate agent to get your pricing right, encourage buyer competition and sell faster

Get your home in shape to sell sooner rather than later

Set up your home’s online curb appeal

Include a 3-D home virtual tour or an interactive floor plan in your listings for more page views and saves

Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again?