The past year has proven to be a challenging one for the housing market, leaving both buyers and sellers in a state of uncertainty. As we look ahead to
2024, a recent article published on Realtor.com offers insights into what we can expect in the coming year. While some positive developments are on the horizon, challenges are likely to persist, shaping the real estate landscape. Let's delve into the key takeaways from the Realtor.com 2024 forecast.
Affordability: A Baby Step in the Right Direction
According to Realtor.com Chief Economist Danielle Hale, 2024 is expected to bring a slight improvement in affordability. While the market may not experience a major breakthrough, it's anticipated to stabilize, offering some relief for buyers who have grappled with the worst affordability challenges since the early 1980s. Hale states, "It's going to stop getting worse." Home prices are projected to see a modest decline of about 1.7%, providing a breather for buyers and allowing incomes to catch up.
Quoting Hale, "It will be a bit of a break after what have been pretty relentless home price increases. It's going to be a big leap forward for buyers' mental health."
Mortgage Rates: A Retreat, but Not to Pre-Pandemic Lows
The housing market has faced headwinds from soaring mortgage rates, rising from the high 2% to the mid-7% range over the past three years. While rates are expected to retreat in 2024, Realtor.com's economists project an average of about 6.8% for the year, falling to about 6.5% by year's end. Despite this decrease, rates are not expected to reach the pre-pandemic lows, hindering the market's ability to recover significantly.
Quoting Hale, "Small changes in rates can drive big changes in your monthly payments, especially when prices are high."
Housing Shortage: A Growing Challenge
One of the most significant challenges in the coming year will be the exacerbation of the housing shortage. Existing homes for sale are predicted to decrease by 14% in 2024 compared to the previous year. High mortgage rates are discouraging homeowners from selling, contributing to a vicious cycle where limited inventory stifles market activity. However, builders are expected to continue constructing new homes, providing some relief to the shortage.
Hale notes, "When buyers go shopping, they're going to see more new homes."
Home Sales: Anticipated Low Numbers
With homeowners hesitant to list properties and buyers grappling with affordability, existing-home sales are predicted to increase by just 0.1% in 2024. This is a significant decline from the traditional sales numbers between 2013 and 2019 and a dramatic drop from the sales peak in 2021 during the pandemic. The challenging market conditions are likely to persist, affecting the overall volume of home sales.
Renters' Market: A Shift in Dynamics
As many prospective buyers are priced out of the market, the rental market is expected to undergo a shift. After years of steady price growth, rents are projected to decrease by 0.2% in 2024. Additionally, an increase in apartment construction over the past year is expected to provide renters with more options, helping to alleviate some of the pressure on rental prices.
Quoting Hale, "The fact that they're not continuing to go up is going to be a welcome change."
Navigating the housing market in 2024 requires a nuanced understanding of the challenges and opportunities outlined in Realtor.com's forecast. While some relief is in sight for buyers in terms of affordability and a slight dip in home prices, the overall market conditions remain complex. The interplay of factors such as mortgage rates, housing shortages, and evolving rental dynamics will shape the real estate landscape in the coming year. For a detailed exploration of these trends, refer to the original article on Realtor.com.
