US: Housing Market Predictions For 2024

Experts insist the housing market will improve, but hopeful buyers continue to face delays, partly due to inflation, which is slow to cool off, further postponing Federal Reserve rate cuts.

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Mortgage rates indirectly track the federal funds rate, which banks use as a guide for overnight lending. 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.

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However, even a single rate cut could ease mortgage rates enough to improve housing market conditions. For example, a drop in mortgage rates from 6.8% to 6% could significantly boost a buyer’s purchasing power, according to a recent study by Realtor.com and the National Association of Realtors (NAR). But experts don’t expect such a drop to happen soon.

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Despite persistently high mortgage rates, U.S. home prices remain unaffected, posting a 6.5% annual 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.

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On a positive note, resale inventory is starting to emerge in certain regions this spring, which should help slow the pace of home price growth.

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“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 those to settle back somewhat from peak or near-peak levels.”

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Mortgage rates would also need to cool off, but the timeline for that development seems to be extending, with rates lingering around 7%. The 30-year fixed mortgage rate slightly dipped to 6.99% for the week ending June 6, according to Freddie Mac.

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However, when mortgage rates finally begin to decline, Gumbinger advises against hoping for a rapid decrease. Rapidly falling rates could create a surge in demand that eliminates any inventory gains, causing home prices to rebound.

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“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.

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Gumbinger adds that mortgage rates returning to a more "normal" range of upper 4% to lower 5% would help the housing market gradually return to 2014-2019 levels. However, he predicts it could be a while before rates reach that range again.

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