Housing Market Predictions for 2024

138

Housing market dynamics are poised for a shift in 2024, offering a glimmer of relief for homebuyers as prices are anticipated to gradually decline. The year 2023 witnessed relentless increases in home prices, setting new records month after month. Concurrently, the scarcity of available homes persisted due to a historic low inventory, fueled by elevated mortgage rates that essentially trapped homeowners in their existing mortgages.

Projections indicate a reversal in both price and inventory trends in the coming year. The anticipation is that potential home sellers, disillusioned by the prolonged absence of historically low rates seen in 2021, will be prompted to list their properties. The resultant increase in supply is expected to intensify competition among sellers, leading to a gradual reduction in home prices – a positive turn of events for prospective buyers.

While price drops are likely to be marginal, forecasts a modest decrease of 0.2% over the next year, with Redfin expecting a slightly more significant decrease of about 1%. Despite the modesty of these drops, they represent a favorable departure from the persistent price increases of the recent past.

In contrast to the positive news on home prices, the outlook for mortgage rates presents a less optimistic picture. Mortgage rates, closely tied to the Federal Reserve’s interest rate policy, are not expected to experience a substantial decrease in the near future. Experts predict that interest rates may not see a decline until late 2024, keeping mortgage rates relatively high. Redfin projects a modest drop to around 6%, down from the current rate of over 7%, while Zillow suggests that rates will exhibit “staying power.” This means that despite potential decreases in home prices, buyers may still contend with less favorable home loan rates compared to the ultra-low rates of two years ago.

With mortgage rates expected to remain relatively high and home prices slow to decline significantly, both Redfin and Zillow foresee a growing preference for renting among potential homebuyers. Redfin cites a June survey revealing that one in five millennials anticipates never owning a home, indicating a shifting attitude towards homeownership. Zillow goes further to predict that single-family rentals may become the new “starter home,” offering amenities like private backyards that some of the more affordable homes for sale may lack. Additionally, urban areas are expected to witness a surge in renters as the cost gap between suburban and urban rental expenses narrows.

Amidst these evolving trends, the homebuying process could become more cost-effective and streamlined for buyers. Redfin anticipates that increasing competition among real estate agents will benefit homebuyers. Widespread discounting among competitors in 2023, whether through reduced fees offered to buyers’ agents, commission refunds, or private listing agreements, has been observed by Redfin. The company predicts that this competition will lead to more negotiations over commission fees, potentially favoring buyers.

Furthermore, Redfin envisions a scenario where more buyers bypass buyer agents altogether, opting to work directly with listing agents. This shift could provide an avenue for additional savings in commission costs. On a different note, Zillow envisions improvements to the homebuying experience through the widespread adoption of artificial intelligence tools by both buyers and agents. AI is already being utilized by agents to enhance listing descriptions and create 3D content for property listings.

In summary, the upcoming year holds promise for potential homebuyers, with expectations of easing home prices, potential mortgage rate reductions, a growing inclination towards renting, and a more competitive and streamlined homebuying process.