Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again?
What many had hoped would be a rosy spring home-buying season has become a thorny challenge for home shoppers already demoralized by a challenging market.
Home sale activity stagnated last month as mortgage rates and home prices continued upward. One silver lining is that more resale inventory entered the market, which should help rein in home price growth, at least to some extent.
Even so, experts say the market will only see momentum return once mortgage rates drop low enough to make homes more affordable and incentivize homeowners locked in at cheap rates to move.
Current Mortgage Rates for June 13, 2024
Housing Market Forecast for 2024
Experts insist the housing market will improve. Unfortunately, hopeful buyers continue to see a delay in this transformation, thanks partly to inflation, which is taking its sweet time cooling off, further delaying the Federal Reserve from cutting the federal funds rate .
Mortgage rates indirectly track this benchmark interest rate banks use as a guide for overnight lending. Consequently, with the federal funds rate at its highest level in over two decades and the first of three anticipated rate cuts seemingly deferred, mortgage rates—and borrowers—are feeling the impact.
However, one rate cut could make mortgage rates easing enough to improve housing market conditions. For example, a drop in mortgage rates from 6.8% to 6% could significantly increase a buyer’s purchasing power, according to a recent Realtor.com and National Association of Realtors (NAR) study. But experts don’t expect such a drop to happen any time soon.
“With mortgage rates remaining around 7%, significant improvements are unlikely in the short term,” said Jiayi Xu, economist at Realtor.com , in an emailed statement.
Meanwhile, U.S. home prices remain unaffected by persistently high mortgage rates, posting an annual 6.5% gain in March—the ninth consecutive month of year-over-year increases and a new all-time March high—according to the latest S&P CoreLogic Case-Shiller Home Price Index. The Index has hit new highs in six of the past 12 months.
All that said, some good news is poking through this spring—resale inventory is starting to emerge in certain regions, which should help slow the pace of home price growth.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com . “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
Of course, mortgage rates would need to cool off, but the timeline for that development seems to be getting more protracted, with rates lingering around 7%. According to Freddie Mac, the 30-year fixed mortgage rate slightly dipped to 6.99% the week ending June 6.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
NAR Settlement Rocks the Residential Real Estate Industry
Following years of litigation, the NAR has agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. A federal judge granted preliminary approval for the settlement in April.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though a final approval hearing is not scheduled until November, the required practice changes laid out in the agreement will take effect on August 17, according to an NAR press release.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings.
Moreover, sellers will no longer be responsible for paying buyer broker commissions—upending an accepted practice that has been in place for years—and real estate agents participating in the MLS must establish written representation agreements with buyers.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
If you sold a home in the past ten years, you may be eligible for a small piece of this settlement pie. Visit realestatecommissionlitigation.com for more information about filing a claim.
How Will the New Rules Impact the Buying and Selling Process?
Per NAR’s settlement terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary thing that will change is the decoupling of the seller and buyer commissions in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to visit countless broker websites to find out who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission before starting their search.”
NAR Changes Will Impact These Home Buyers Most
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Both Gibbs and Gorkowski note that veterans and active duty service members taking out VA loans face a unique challenge under the new rules. The Department of Veterans Affairs policy prohibits VA buyers from paying broker commissions, meaning they must be negotiated with sellers.
However, this issue may be resolved—at least for now.
After NAR and other industry stakeholders pushed the VA to revise its policy, the VA signaled it would temporarily lift its buyer agent payment ban. This temporary change may help prevent many veteran home shoppers from going without representation.
Gibbs and Gorkowski are also among the many agents who are especially concerned about first-time home buyers. After July, first-time buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers offer compensation.
“This is a very troubling situation,” Gorkowski says.
Housing Inventory Forecast for 2024
Despite more resale homes entering the market, the inventory shortage remains severe and likely will for some time, thanks to multiple headwinds.
For one, many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for a while.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
New home construction has provided some relief, but not enough to fill the inventory gap meaningfully.
Entry-level home supply is particularly dire, contributing to an ongoing cycle of propped-up demand and inflated prices.
Here’s what the latest home values look like around the country.
Typical U.S. Home Values by State
Here I considered single-family housing data from Zillow. See what the typical home sells for in your state.
Home Builder Sentiment Dips
Following a rebound in positive outlook for new construction that began at the end of 2023, the most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, retreated into troubling territory in May, tumbling five points from 51 to 46. A reading of 50 or above means more builders see good conditions ahead for new construction.
Meanwhile, permits for new single-family homes fell to their lowest seasonally adjusted annual rate since August, slipping 0.8% in April, according to the latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
On a brighter note, home completions were up 15.4% thanks to a rise in housing starts over the past year.
Nonetheless, Lawrence Yun, chief economist at NAR, said that this burst of home completions may be a short-lived trend due to recent declines in housing starts. Moreover, if inflation remains sticky, it might prolong higher interest rates, discouraging builders from constructing new homes and dampening buyer demand.
Residential Real Estate Stats: Existing, New, and Pending Home Sales
Sky-high mortgage rates in April dampened the start of the spring home-buying season, leading to withering housing market activity. Here’s what the latest home sales data has to say.
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Existing-Home Sales
According to the latest report from NAR, existing-home sales dipped by 1.9% in March. The annual sales rate also fell 1.9%. A year ago, home buyers could get a mortgage rate at least half a percent lower when homes were more affordable.
If inflation and rates ease—a big “if”—experts believe home sales activity could perk up during the summer. Nonetheless, many prospective buyers will likely be left out in the cold.
“[T]he improvement will be unevenly distributed for buyers of different income levels and in different markets,” said Danielle Hale, chief economist at Realtor.com , in an emailed statement.
One upside to fewer sales is that existing inventory has increased since December. The latest data shows inventory rising 9% month-over-month, logging 1.21 million unsold homes at the end of March. Still, only 3.5 months of inventory remain at the current sales pace. Most experts consider a balanced market between four and six months.
Meanwhile, prices continue to soar to record highs. The median price for an existing home rose to $407,600, a 5.7% jump from a year ago.
New Home Sales
Despite their shiny appeal, new homes once again demonstrated their vulnerability to high mortgage rates.
Amid mortgage rates blowing past 7%, April sales of newly constructed single-family houses slumped 4.7% compared to March and 7.7% from a year ago, according to the latest U.S. Census Bureau and HUD data.
Experts say the spike in existing inventory also played a part in luring buyers away from new homes.
“As the inventory of existing homes has increased, homebuyers have choices and demand for new construction has cooled slightly,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
The median price for a newly built home in March was $433,500, compared to $417,200 a year ago.
Pending Home Sales
NAR’s Pending Homes Sales Index posted a solid gain in March, rising 3.4%, even as mortgage rates stalled in the upper 6% range by the end of the month. Pending transactions were up marginally year-over-year.
A pending home sale marks the point in the purchase transaction when the buyer and seller agree on price and terms; it’s considered a leading indicator of a future closed sale. This increase marks two consecutive months of positive pending sales data, signaling a potential rebound in existing sales in the coming months.
Surging Mortgage Rates Throw Cold Water on Spring Home-Buying Hopes. Will Summer Be Better?
We’re well into the spring home-buying season, but activity remains limp, thanks to persistently high housing costs keeping frustrated shoppers on the sidelines.
In the week ending April 25, when mortgage rates were 7.17%, borrowers who put 20% down on a $407,600 median-priced resale home with a 30-year mortgage had to shell out a monthly mortgage payment of $2,206, not including property taxes and insurance.
By comparison, someone who purchased a resale home a year ago when the median price was $385,800 and the rate was 6.43% is paying $1,936 monthly—or $270 less.
Meanwhile, newly built construction is also unaffordable for many, even with builder concessions and rate buydowns. Over 103 million households can’t afford a median-priced new home, according to an NAHB report reflecting the number of households priced out of the market.
So, will hopeful home buyers finally get some relief this summer?
Even though home prices are receding in certain markets amid a recent spurt of inventory, Mark Fleming, chief economist at First American Financial Corporation, stated in a recent report that significant improvement in affordability is unlikely to happen soon.
“A ‘higher-for-longer’ mortgage rate environment will continue to sap house-buying power,” Fleming said.
Pro Tips for Buyers and Sellers
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Pro Tips for Buying in Today’s Real Estate Market
Hannah Jones, a senior economic research analyst at Realtor.com , offers this expert advice to aspiring buyers:
Pro Tips for Selling in Today’s Real Estate Market
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Will the Housing Market Crash in 2024?
As already-high home prices continue trending upward, you may be concerned that we’re in a bubble ready to pop. However, the likelihood of a housing market crash —a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners are much more secure than those who came out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
"If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy in an emailed statement.
Will Foreclosures Increase in 2024?
According to real estate data firm Attom, lenders began foreclosures on 21,753 properties in April, down 7% nationwide from the previous month and down 3% from a year ago.
Meanwhile, completed foreclosures increased compared to the previous month, with real estate-owned properties, or REOs, jumping 8% in April. REOs are homes that didn’t sell at foreclosure auctions and were taken over by lenders.
“While there is a general downtrend in foreclosure starts and filings, we have also seen an increase in completed foreclosures,” said Rob Barber, CEO at Attom, in a report. ”This mixed activity underscores the importance of closely monitoring these developments to understand the ongoing dynamics in the real estate market.”
Despite the national increase in REOs, experts don't expect a wave of foreclosures in 2024.
“Foreclosure activity continues to lag behind pre-pandemic levels and is still at about 70% of 2019 numbers,” says Sharga. REOs sit at roughly one-third of 2019 levels.
A significant factor contributing to today’s comparatively low levels of foreclosure activity is that homeowners—including those in foreclosure—possess an unprecedented amount of home equity, Sharga explains, amounting to nearly $32 trillion in Q4 2023, according to Federal Reserve Bank of St. Louis data.
To put that into context, this historical level of home equity reflects a roughly $14 trillion increase from five years ago. It exceeds three times the amount of home equity from a decade ago.
“For a homeowner in the early stage of foreclosure, that equity helps them avoid a foreclosure sale, either by leveraging the equity to pay down past due mortgage bills, or by selling their property in order to protect the equity they'd otherwise lose at the auction,” Sharga says.
When Will Be the Best Time To Buy a Home in 2024?
Buying a house —in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy .
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there's no guarantee that tomorrow's conditions will be all that much better in the aggregate than today's.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.