Real Estate in 2024

1113 words / 6336 characters

The Housing Market Outlook for 2024: A Comprehensive Analysis

‍

Image Source: FreeImages

‍

## Introduction

The housing market has been a topic of great interest and concern for both buyers and sellers in recent years. With fluctuating mortgage rates, soaring home prices, and limited inventory, many are wondering what to expect in the housing market in 2024. In this article, we will delve deep into the forecasts and insights provided by leading research firms and economists to provide a comprehensive analysis of the housing market outlook for the upcoming year.

Current State of the Housing Market

Before we explore the predictions for 2024, it is essential to understand the current state of the housing market. According to the National Association of Realtors (NAR), the median sale price for an existing home in the U.S. reached a record high of $406,700 in July 2023. Additionally, mortgage rates have soared, with the average 30-year mortgage rate hitting 7.36 percent, the highest it has been in over 20 years. These factors, combined with tight inventory levels, have created challenges for both buyers and sellers.

Forecast for Mortgage Rates in 2024

One crucial factor that will heavily influence the housing market in 2024 is mortgage interest rates. In 2022, mortgage rates doubled due to the Federal Reserve's efforts to combat inflation. However, experts predict that as inflation eases, mortgage rates will cool slightly in the upcoming year. Orphe Divounguy, a senior economist at Zillow, suggests that rising productivity and tighter financial conditions indicate that the Federal Reserve's campaign against inflation may soon come to an end. While lower rates are anticipated, they are expected to remain elevated enough to challenge affordability for buyers and deter sellers from giving up their low existing rates.

Housing Affordability in 2024

The intersection of high home prices and mortgage rates raises concerns about housing affordability in 2024. The median home sale price in July 2023 was $406,700, marking a 1.9 percent year-over-year increase, according to NAR data. These elevated prices, combined with the expectation of slightly lower but still high mortgage rates, will continue to pose challenges for buyers. Chen Zhao, leader of the economics team at Redfin, predicts that core inflation will remain above the Federal Reserve's target range, further impacting housing affordability. However, Selma Hepp, chief economist at CoreLogic, believes that a decline in mortgage rates will drive more sellers to trade their existing homes, adding much-needed inventory to the market and potentially leading to more transactions.

Forecast for Home Sales in 2024

The volume of home sales has experienced a decline in recent times, with existing-home sales in July 2023 dropping by 16.6 percent year-over-year. However, experts anticipate a potential pivot in 2024 if mortgage rates decrease as predicted. Lawrence Yun, the chief economist at NAR, believes that retreating mortgage rates will attract more buyers and sellers, stimulating market activity. Similarly, Zhao expects housing sales to increase slightly, although rates are likely to remain above 6 percent. While the forecast suggests an improvement in sales, it is important to note that significant increases are not expected unless demand falters.

Housing Inventory Outlook for 2024

One of the major challenges in the current housing market is the limited inventory available for sale. As of July 2023, there was a 3.3-month supply of housing inventory, which is considered low and indicative of a seller's market. Lawrence Yun emphasizes the need for more homes to be listed for sale, stating that the market could easily absorb a doubling of inventory. While it is unlikely that a surge in homeowners listing their properties or a substantial increase in new construction will occur, Yun expects some increase in housing inventory for 2024. This could be driven by more home construction and existing homeowners willing to sell as they give up their low mortgage rates.

Home Price Trends in 2024

Home prices have been skyrocketing in recent years, reaching historic highs. In July 2023, the median home price exceeded $400,000 for the fourth time, according to NAR data. Despite expectations for inventory levels to improve slightly, Lawrence Yun predicts that home prices will rise by around 3 to 4 percent in 2024. This projection is closely tied to the constrained inventory and the reluctance of sellers to give up their low interest rates for higher ones. While prices may not fall on a year-over-year basis, a decline would only occur if demand significantly weakens.

Buyer's vs. Seller's Market in 2024

The current housing market heavily favors sellers due to limited inventory and high demand. With more buyers than available homes, each property becomes a highly sought-after commodity. As a result, a significant shift towards a buyer's market is unlikely in the near future. Selma Hepp states that the significant shortage of inventory suggests that it would be hard for the market to become a buyer's market anytime soon. Chen Zhao supports this view, stating that supply is likely to remain below what is considered a balanced market. Therefore, buyers will continue to face affordability challenges, and sellers will have the upper hand in negotiations.

Integration of Technology in the Housing Market

In addition to the factors mentioned above, the housing market in 2024 will witness the integration of technology to streamline processes and address industry challenges. Artificial intelligence (AI) and other technological advancements are expected to play a significant role in aiding real estate agents in providing better services to buyers and sellers. These tools can assist in market analysis, buyer matching, and streamlining transaction processes. Additionally, commission advances, a financial tool that allows real estate agents to access their commission before closing, will provide agents with greater flexibility and financial stability. These advancements will likely contribute to a more efficient and dynamic housing market in 2024.

Conclusion

The housing market in 2024 is poised to present challenges and opportunities for both buyers and sellers. While mortgage rates are expected to cool slightly, they will remain elevated enough to impact housing affordability. Home sales are predicted to increase, albeit not dramatically, and inventory levels may improve slightly, leading to more transactions. Home prices are anticipated to rise, driven by limited inventory and sellers' reluctance to give up low interest rates. The market will likely remain favorable for sellers, with demand continuing to exceed supply. As technology continues to advance, real estate agents will have access to tools that enhance their services and streamline processes. Overall, navigating the 2024 housing market will require careful consideration and the guidance of experienced professionals.