Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again?
forbes.com
Updated: Jul 3, 2024, 1:18pm
What many had hoped would be a rosy spring home-buying season ended as a thorny challenge for many prospective home buyers already demoralized by a frustrating market.
Yet, even as sales stalled amid elevated mortgage rates and home prices, one silver lining emerged—more resale inventory entered the market, which has begun to put some downward pressure on the pace of home price growth.
Other good news for home shoppers is the decline in the median price for a new home—now below the median resale home price—even as builders continue offering incentives to lure buyers.
Nonetheless, experts say the housing market will only see renewed momentum once mortgage rates drop enough to ease buyer affordability obstacles and incentivize homeowners locked in at low rates to move.
Housing Market Forecast for 2024
Experts insist the housing market will improve despite high mortgage rates, out-of-reach home prices and sluggish sales transactions amid dampening demand.
Unfortunately, hopeful buyers continue to see a delay in this yearned-for transformation, thanks to several ongoing headwinds. One is inflation taking its sweet time cooling off, further delaying the Federal Reserve from cutting the federal funds rate.
Mortgage rates indirectly track this benchmark interest rate banks use as a guide for overnight lending. Consequently, with the federal funds rate at its highest level in over two decades, mortgage rates—and borrowers—are feeling the added impact on their ability to afford a home.
Meanwhile, U.S. home prices remain unaffected by persistently high mortgage rates, posting an annual 6.3% gain in April, according to the latest S&P CoreLogic Case-Shiller Home Price Index. Even as this annual gain marked a slowdown from the 6.5% gain in March, the index still broke the previous month’s record high.
Many experts expect a Fed rate cut will help stimulate the housing market, but it remains unclear when—and if—even a single cut will occur in 2024.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
Of course, mortgage rates would need to cool off, which seems promising given the recent declines. The average 30-year fixed mortgage rate trended down over the course of June and early July, coming in at 6.95% for the week ending July 3.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
NAR To Implement Settlement Agreement Changes in August
Following years of litigation, the NAR has agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. The settlement received preliminary court approval in April. A judge is expected to grant final approval in November. Meanwhile, NAR announced that the new required practices will go into effect on August 17.
The required new rules prohibit broker compensation offers on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings.
Moreover, sellers will no longer be responsible for paying buyer broker commissions—upending an accepted practice that has been in place for years—and real estate agents participating in the MLS must establish written representation agreements with buyers.
If you sold a home in the past ten years, you may be eligible for a small piece of this settlement pie. Visit realestatecommissionlitigation.com for more information about filing a claim.
Housing Inventory Forecast: When Will There Be Sufficient Supply To Reduce Prices?
Despite more resale homes entering the market, the inventory shortage remains severe and likely will for some time, thanks to multiple headwinds.
For one, many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for a while.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
New home construction has provided some relief, but not enough to fill the inventory gap meaningfully.
The U.S. remains 4.5 million homes short, up from 4.3 million a year ago, according to Zillow analysis.
Entry-level home supply is particularly dire, contributing to an ongoing cycle of propped-up demand and inflated prices.
Here’s what the latest home values look like around the country.
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