Good news for buyers who are tired of high interest rates: relief is coming. After months of turmoil on the housing market, it should be a little calmer by 2024.
Despite the fact that many of the same factors which impacted affordability in 2023 – namely high mortgage rates and a lack of inventory – will continue to be present in 2024, no one is expecting conditions to worsen for buyers and sellers. Many housing experts think that the year 2024 will mark a turning point in real estate. They believe home sales will rebound somewhat, mortgage rates will drop, and there will be more listings.
Housing affordability will continue to be the number one issue for homebuyers. However, a slight reduction in mortgage rates and costs will reduce the cost of homeownership.
What else can we anticipate from the housing market in 2024? Let’s look at some predictions about the changes in mortgage rates, home sales, and inventory over the next year.
Mortgage rates are expected to decrease
In 2023, mortgage rates were a major obstacle for homebuyers. After beginning the year in a downward spiral, mortgage rates quickly climbed to levels not seen for two decades, flirting at times with 8%.
Rates have fallen in the past two months. The Federal Reserve has been holding the federal funds rate at the same level for the last few months, despite a slowing economy and weakened labor market. They have also signaled the possibility of lowering rates in 2024.
The 10-year Treasury yields have fallen, and mortgage rates are following suit. Freddie Mac’s fixed 30-year-rate loan has averaged less than 7% since mid-August. Many experts agree that the downward trend would continue in the coming year, but it is not guaranteed.
Expect a gradual drop in the range of 3% to 4%. There are many different predictions about how low interest rates will be.
Zillow expects rates to remain between 7% and 7,5% for the entire year. The National Association of Realtors, on the other hand, is more optimistic. They expect rates to be below 7% at the beginning of spring and around 6.3% by the end of the year. Realtor.com, on the other hand, expects rates to average 6.5% by 2024. Mortgage rates are currently averaging 6.61 % and have been trending downwards since the end of December. It looks good that rates will stay below 7% in 2024.
Home inventory will increase
Sellers were reluctant to list their houses last year because they did not want to lose the low mortgage rates that they had previously locked in. In 2023, the number of available homes was low.
Buyers can look forward to a slight improvement in the number of homes for sale by 2024. The overall inventory could grow by up to 30% in comparison to last year. Some markets may even see a faster increase.
In recent research, some homeowners, who purchased when rates were between 5% and 6 %, have adjusted their expectations about how low rates are going to go. They are much less sensitive to rate-lock effects. The rate at which homeowners feel compelled to sell their home is rising.
Home prices are likely to remain flat
The dynamics that have kept home prices high is unlikely to change, even if housing supply and mortgage interest rates improve.
Inventory remains well below demand. According to the St. Louis Fed, before the pandemic the average number of active listings was over a million homes. By comparison, there were only 754,846 homes at the end of November.
What does this mean to the market? The market is under pressure as buyers compete for the few available houses, which keeps prices up. Prices won’t fall unless there is a large and sudden influx of listings. The majority of experts predict that home prices will either remain flat in 2024 or decline by 1%.
It doesn’t necessarily mean that there won’t be some markets with major declines in home prices. San Francisco and Las Vegas are two cities that have seen prices drop significantly. There’s a chance more cities could see prices fall, but not to the point where it would threaten the housing market.
Sales of homes will increase
The majority of housing analysts predict that sales will improve in 2024 due to the improving market conditions. Not everyone is in agreement about how much better the market will be.
Realtor.com has the most conservative estimate of home sales. It predicts that existing home sales will increase by 0.1%, or about 4,000,000 homes. NAR is at the other end of the spectrum, predicting a 13.5% increase in sales compared to the year 2023.
It all comes down to the fact that mortgage rates are expected to continue to fall. This will encourage more buyers to come out and even some sellers may be prompted to list their home.