As we move into the new year, the real estate market is poised for another period of change. Factors such as mortgage rates, housing inventory, and pricing will play a major role in shaping the landscape. Whether you’re looking to buy or sell, understanding the key predictions for 2024 can help you prepare for what’s ahead.

A Look Back at 2023

The housing market in 2023 was challenging for many buyers. Mortgage rates soared to 7.79% in October, reaching levels not seen in decades. Meanwhile, home prices climbed, with the median home price surpassing $400,000 in the third quarter. Monthly mortgage payments also hit record highs, averaging $2,306 in July.

Despite these obstacles, there is optimism for 2024. While it was a tough year for many, it could be the right time for others to enter the market. Let’s take a look at the key predictions for 2024.

1. Mortgage Rates Are Likely to Drop

Mortgage rates were one of the biggest hurdles for homebuyers in 2023. After starting the year on a hopeful note, rates surged to nearly 8%, causing many to pause their plans. However, recent signs indicate that the trend may be reversing. With a slowing economy and a decline in job growth, the Federal Reserve has held steady on interest rates, hinting that they might reduce rates in 2024.

This shift is already affecting mortgage rates. As of late 2023, Freddie Mac’s 30-year fixed-rate loan dropped below 7% for the first time since August. Experts predict that mortgage rates will continue to decline, with the National Association of Realtors forecasting an average rate below 7% by the spring, and around 6.3% by the end of the year.

2. Housing Inventory Will Increase

In 2023, many homeowners were hesitant to sell due to the attractive mortgage rates they had locked in during earlier years. As a result, the market faced a significant inventory shortage. However, 2024 is expected to bring some relief. Economists are optimistic that more homes will hit the market, with predictions of up to 30% more inventory than in the previous year.

This shift is driven by homeowners who bought properties when mortgage rates were between 5% and 6%. As these homeowners become less sensitive to current rates, many are reconsidering their decision to hold onto their properties. This change in mindset is likely to increase the number of homes for sale, benefiting buyers who have been struggling to find options.

3. Home Prices Will Stay Stable

Despite expected improvements in inventory and mortgage rates, home prices are likely to remain stable in 2024. The demand for homes continues to outstrip supply, and although the inventory shortage may ease, the gap between available homes and potential buyers is still significant.

Before the pandemic, the number of active listings was over 1 million, but as of November 2023, that number had dropped to around 754,846. As long as demand exceeds supply, home prices are expected to remain stable or see a slight decrease of around 1% in 2024. Major price drops are unlikely given the ongoing demand for homes.

4. Home Sales Are Set to Rise

With improved market conditions, many analysts predict an increase in home sales for 2024. However, the extent of the increase remains up for debate. Realtor.com forecasts a modest 0.1% rise in home sales, while the National Association of Realtors expects a more significant increase of 13.5% compared to 2023.

The driving force behind these predictions is the expectation that mortgage rates will continue to decline. Lower rates could encourage more buyers to enter the market and prompt some current homeowners to list their properties for sale, helping to boost overall sales.

Conclusion

The 2024 real estate market is shaping up to be a year of gradual improvement. While challenges like high home prices and mortgage rates are still present, the anticipated drop in rates and increased housing inventory provide hope for both buyers and sellers. As always, the key to navigating the market will be staying informed and prepared for changes as they arise. Whether you’re buying or selling, understanding these trends will help you make better decisions in the year ahead.