Amidst historically elevated home prices and persistently tight inventory, prospective sellers and hopeful buyers are grappling with apprehension in today's housing market. However, industry experts offer insights into what the upcoming year may hold:
Anticipated Boost in Home Sales Driven by Improved Inventory: After a two-year span marked by substantial declines, the real estate market is poised for a resurgence in existing-home sales in 2024. Homeowners, initially reluctant to sell due to enticing mortgage rates and considerable home appreciation, are now more open to the idea of moving. Projections from the National Association of Realtors (NAR) indicate a potential 13.5% increase in existing-home sales and a noteworthy 19% uptick in new-home sales by the year's end.
Dynamic Shifts in Mortgage Rates: Following a recent peak near 8%, mortgage rates are expected to decline. NAR foresees the 30-year fixed-rate mortgage averaging 6.3% in 2024, with other estimates, such as those from realtor.com®, suggesting a rate of 6.5%. This adjustment is likely to enhance housing affordability, enticing a greater number of prospective home buyers back into the market. NAR's analysis indicates that a rate of approximately 6.6% allows the average American family to afford a median-priced home without surpassing the 30% income threshold, a key marker for affordability.
Home Price and Affordability Outlook: NAR predicts a modest uptick in the median home price, reaching $389,500 in 2024, reflecting a 0.9% increase from the previous year. With mortgage rates stabilizing at 6.6%, approximately 4.5 million households are expected to regain affordability for a median-priced home without exceeding the 30% income-to-housing threshold, signaling improved affordability conditions.
Unpredictable Impact of Inflation: While optimism surrounds the housing market's prospects for 2024, inflation remains a significant wildcard. Danielle Hale, chief economist at realtor.com®, emphasizes its potential to disrupt optimistic forecasts. If inflation persists, there is a risk of increased long-term interest rates, discouraging homeowners from selling and exacerbating inventory challenges. Higher housing costs may also keep potential homebuyers in the rental market. Monitoring inflation data is crucial, given its substantial implications for the overall stability of the housing market.
Challenges and Potential Resilience in 2024: The convergence of high mortgage rates, soaring home prices, and limited inventory positions the 2024 housing market as a challenging landscape for both buyers and sellers. However, a slight cooling of rates observed towards the end of 2023, coupled with expert predictions, suggests that if this trend continues into 2024, market activity could experience a noteworthy resurgence in response.
