Expert Projections For The Housing Market : Six Perspectives 2024

The "mortgage rate lock-in effect," a phenomena that slowed the industry to a stop and exerted downward pressure on everything from inventory levels to home sales, has defined the 2023 housing market more than any other term.

Homeowners were prevented from selling their property and purchasing a new one at higher interest rates by the sub-5% mortgage interest rates of the epidemic era, to which 85% of mortgage holders are locked in. According to Freddie Mac, these rates peaked at 7.79% for the week ending October 26.

Will Things, However, Alter This Year?

There are indications that things will become better in the market. Over the last seven weeks, mortgage rates have steadily decreased; for a 30-year fixed mortgage, the average rate was 6.61% in the week ending December 28.According to the National Association of Realtors, existing-home sales increased in November, up 0.8% from October and ending a run of five consecutive months of decreases. This growth was attributed to reduced mortgage rates. Sales decreased 7.3% from the previous year (from 4.12 million in November 2022). "Given the sharp decline in mortgage rates over the past few weeks," National Association of Realtors Chief Economist Lawrence Yun said.

Housing Shortages Will Continue

The majority of specialists do not anticipate that the scarcity of available homes will end. According to Realtor.com chief economist Danielle Hale, "despite this, households will have more options in 2024 from a small uptick in single-family home construction and the completion of the large number of multifamily units that are under construction, the vast majority of which are destined to be rental homes."
While persistent shortages prevent prices from falling too far, the surge in housing and rental prices will be restrained by the increased supply of newly constructed homes and flats.

The severe supply shortage that exists now will be difficult to reverse, according to First American deputy chief economist Odeta Kushi. "While single-family housing starts have steadily increased throughout 2023, it will take years of accelerated new home construction to narrow the supply shortage gap from more than a decade of underbuilding," she states.

Growth In Home Prices Will Differ Between Markets

In light of this, it is anticipated that nationwide sales will only slightly increase in 2024 over the long-term low of 2023. According to Hale, real estate activity would differ greatly amongst markets, with double-digit increases anticipated in certain high-growth locations.

In two significant market groupings, combined sales and price activity are anticipated to be at their peak. According to Hale, the first are reasonably priced markets in the Midwest and Northeast, such as Toledo, Ohio, and Rochester, New York. The second group is located in Southern California, a location that may benefit from a mortgage rate cut as it recovers from an exceptionally weak 2023. In November 2022, the median price of an existing home for all property types was $372,700; this is a 4% increase over the same month in 2022. Price rises were reported in all four US regions. According to Yun, "home prices keep marching higher." "The only way to stop price appreciation is if supply increases dramatically."

Affordability and Mortgage rates

The majority of analysts believe that the average 30-year mortgage rate would fluctuate during the first quarter, ranging from 6.1% to 7%, before declining over the course of the year. According to Redfin Chief Economist Daryl Fairweather, "Mortgage rates are likely to remain well above pandemic-era record lows because financial markets increasingly believe the country will avoid a recession in 2024." By the end of 2024, mortgage rates will have decreased to roughly 6.6%. The modest price fall along with the steady rate decrease will provide much-needed respite to homebuyers.

According to Jeff Taylor, founder and managing director of Mphasis Digital Risk, 30-year fixed rate forecasts would be in the mid-6% area because election year volatility will cause mortgage rates to swing about. According to Taylor, a 5% down payment on a newly constructed home costs $111,000, while a newly constructed home requires $107,000. These figures are based on the current median property prices and a 7.125% interest rate.

In 2024, the Federal Housing Finance Agency estimated that home prices would rise by 4% and mortgage rates would drop by 1%. This would mean that, with a 5% down payment, purchasing a newly constructed home would cost $105,000, while purchasing an existing home would cost $99,000.