2024 Housing Market Forecast

By now we all know that 2023 was one of the worst years in recent memory for the housing market and affordability.

How did it get this way? Through a continuation of negative trends that started at the tail end of 2022 resulting in a severe drop of home sales. The increasing rates also kept families who would normally sell their homes “locked-into" their low mortgage rates while prices continued to rise.

At the end of 2023, activity slightly increased as positive inflation signals helped to lower rates. But will the positive momentum continue into 2024? And if so, will more homebuyers enter the market? How will increased demand impact home values?

Mortgage Rates

Since last October when mortgage rates increased to just above 8%, inflation has started to stabilize and cool off. Recent economic reports continue to indicate that the worst could be over, and we have already seen a decrease in rates from the 2023 October highs. The Fed has also shown optimism about rate cuts in 2024.

While the Fed doesn’t directly control mortgage rates, their monetary policy does hold a correlation. As they cut rates in the face of a cooling economy, mortgage rates should follow.

It’s anticipated that 30-year fixed rates will decrease throughout the year, with the possibility of reaching as low as the mid-5% range by late Q4. With the way things are currently going, this could come sooner. Depending on the loan product and qualification factors, rates hold the potential to dip into the high-4% range.

30-Year Fixed Rate Mortgages

• Mid-5% to mid-6%

• Under 6% should unlock move-up buyers

The decreasing rates also mean there will be opportunities for current homeowners to refinance. In 2023 about $1.3 trillion in home purchase loans were originated despite it being a slow year for the housing market.

Given all those higher-rate mortgages issued in the last two years, there is an opportunity for existing homeowners to take advantage by refinancing their existing loans, leading to substantial savings on their monthly payments.

Home Prices

At the start of 2024 there is a lot of optimism in the real estate market thanks to the easing mortgage rates.

The pandemic led to historically low housing inventory, creating a significant constraint on the housing market, mainly due to the "rate lock-in" effect. Many homeowners, who locked into ultra-low interest rates, opted to stay put instead of listing their homes for sale, with over 60% of mortgage-holders nationally enjoying rates below 4%.

A shift is anticipated in 2024, and we’re expecting the housing supply to increase. Homeowners, even those locked into low rates, may find changing family and financial circumstances prompting more moves and new listings, especially as rates approach 6%. While new listings will contribute to inventory, overall supply is likely to remain relatively low, exerting upward pressure on home prices.

Between 2019 and 2022, the national median home price surged by over 40%, averaging an annual increase of 13.7%, surpassing typical market appreciation rates. The pandemic's strong demand, fueled by historically low mortgage rates and increased savings, propelled this growth.

Although home price growth moderated in 2023, it still outpaced historical averages, rising by 5.2% year-over-year in November 2023 according to CoreLogic's Home Price Insights report.

Looking forward, various factors will influence home prices. Increased inventory will be balanced by a growing number of buyers. Consequently, we anticipate home prices will continue to rise at a rate similar to 2023, averaging between 4.5% and 5% annually.

The Bottom Line

With the easing of inflation and a less restrictive monetary policy, we’re expecting mortgage rates to continue dropping in 2024.

These lower rates will increase market activity, bringing more home buyers to the market. Because of this demand will continue to overwhelm supply, and home appreciation is expected to be right around 5% nationally.

The Brill Team is confident that real estate will continue to be a safe investment and a great way to build wealth.