2024 Housing Market Predictions: Challenges and Potential Ahead

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2024 Housing Market Predictions: Challenges and Potential Ahead

Mortgage rates dropped, which is like a nice present during the holidays. Freddie Mac said the average 30-year fixed rate increased to 6.62% by January 4. But even with this slight improvement, high mortgage rates and expensive homes, plus not many houses for sale, are still making it hard for people to buy homes.

First-time buyers feel less hopeful about affording a home as we approach 2024.


Predictions for the Housing Market in 2024

In 2023, many people who wanted to buy homes felt pretty down.

The mortgage rates went way up, reaching 7.79% in October. The typical home prices in the third quarter were over $400,000. In July, the average monthly payments reached an all-time high at $2,306, according to a company called Intercontinental Exchange, which deals with financial tech and data.

But 2024 might be a better time for some people to buy a home. Even though home prices will likely stay high and maybe even go up in some places, experts think that in certain areas, prices might ease up a bit.

Economists also feel optimistic that the Federal Reserve won't keep raising rates to control inflation. They didn't change the federal funds rate for the third time on December 13. This rate affects mortgage rates indirectly.

However, in 2024, it'll still be challenging for many people to afford homes. There's a lot of demand for houses, but not enough for sale, so prices will probably stay up. Mortgage rates will also be high until the Fed cuts the federal funds rate.

The housing market will be steady in 2024. If the housing market was super hot in 2020-2021 and then really slow in 2023, 2024 won’t be just right yet.


Predictions for Home Sales in 2024

Home prices stayed strong this year, but there was a drop in the number of homes sold. From July to November 2023, existing home sales went down continuously. Still, there was a slight increase in November, reaching 3.82 million sales yearly, which is 7.3 percent lower than the previous year. However, things might change in 2024 if mortgage rates keep decreasing.

If mortgage rates go down, more people might decide to buy or sell homes, which could get the housing market moving again. Sales could go up by about 15 percent next year.

Home sales will go up a bit from this year. However, it's unlikely to see a massive increase as rates are expected to stay over 6 percent.

If mortgage rates drop, it could boost home sales, which experts predict will increase in 2024 compared to 2023. Lower rates encourage more homeowners to sell their homes, adding more houses to the market and leading to more transactions.


Predictions for Housing Inventory in 2024

Many homeowners hold onto their properties due to low-interest rates or reluctance to sell amidst high home prices. This situation keeps demand higher than the available housing, and this trend might persist for some time.

Experts don't anticipate a notable rise in existing homes for sale until mortgage rates drop to around the low 5% mark, which probably won't happen in 2024.

The housing supply remains relatively low, particularly for starter homes, which continues to drive demand and sustain the very high home prices we've been seeing.

However, there are positive signs.

Homebuilders are becoming more optimistic, encouraged by declining mortgage rates and better construction conditions.

The recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) increased from 34 to 37 in December. This uptick indicates that more builders foresee favorable conditions for new construction when the index reads 50 or higher.

Simultaneously, there was a slight rise in new single-family building permits in November, marking the 10th consecutive monthly increase, as the U.S. Census Bureau and U.S. Department of Housing and Urban Development reported.


Will Home Prices Drop?

Housing prices have been crazy high lately — November hit $387,600, just $26K short of the highest ever recorded ($413,800 in June 2022).

So, are home prices going down in 2024? Probably not. They'll likely go up by 3 to 4 percent. Unless there's a significant increase in home building, prices will stay the same. Plus, with recently lower mortgage rates, people are still keen to hold onto their homes rather than sell.

The amount of houses up for sale affects prices. Sellers aren't eager to switch to higher interest rates, so there won't be much for sale. Eventually, more people might sell because of life stuff, but not enough to make prices drop unless fewer people want to buy.


Will 2024 Favor Buyers or Sellers?

So, will 2024 favor the buyer’s or seller’s market? Right now, sellers hold the advantage due to limited available homes. More people are wanting to buy homes than there are homes to buy.

So, each house hitting the market becomes a really popular item since there aren't many options. Unless there's a significant increase in available homes, the situation will unlikely change for sellers next year.

Because there's such a shortage of available homes now, it's tough for things to swing in favor of buyers any time soon.

Considering expectations for interest rates and supply, it seems like demand will stay higher than the number of available homes, just like it is now. The available homes will still be less than what's considered a fair market.

The problem of not having enough homes available won't go away quickly. But when mortgage rates are high, demand might decrease, leading to a more balanced market in 2024. In the coming year, sellers might have to compromise more on closing costs or reduce rates.

Buyers should be careful only to take what they can afford. Home prices are high in many places, and insurance costs have increased notably in coastal areas. Bargains are hard to come by, and deciding to walk away might turn out to be a smart move.



Will Mortgage Rates Decrease in 2024?

Experts think rates will stay high in 2024, but the worst might be over after hitting over 8 percent in October 2023. It's expected that rates will range between 6 and 7 percent in the spring buying season, and it's happening already. As of December 20, the 30-year mortgage rate averaged 6.88 percent.

Will There Be a Housing Recession in 2024?

No. Experts don't see a housing crash coming in 2024. Lending rules are stricter now, and with low housing supply and high demand sticking around, a housing recession next year isn't likely.

Should I Buy a House in 2024 or Wait?

Many people waited in 2023, hoping for a better market in 2024. But with high mortgage rates and little housing available, 2024 might still be challenging for buyers. If rates drop, it could make buying more affordable, and more homeowners might choose to sell, adding more homes to the market.


The Bottom Line

The 2024 housing market might be challenging for buyers and sellers because of expensive homes, few options, and pricey mortgage rates. But by the end of 2023, rates dropped a bit. If this trend continues in 2024, as some experts predict, things might get busier in the housing market.

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