As we stand on the brink of 2024, the housing market’s landscape appears intricate and unpredictable. The market’s prognosis is a complex interplay of numerous factors, such as mortgage rates, home prices, inventory levels, and shifting economic trends.
Housing Market Dynamics in 2024
Mortgage Rates and Home Prices
The year 2023 witnessed a surge in mortgage rates, peaking at 7.79%. Concurrently, median home prices in the third quarter surpassed the $400,000 mark. This fusion of high mortgage rates and steep home prices created an affordability crisis, particularly for first-time buyers.
However, 2024 might bring a sigh of relief to some home buyers. Industry experts believe that although home prices will remain high, they might soften in certain regions.
Economic Indicators and Federal Reserve Policies
The Federal Reserve’s 20-month-long rate-hiking campaign seems to have ended, with the federal funds rate remaining static for two consecutive meetings since November 2023. This rate indirectly influences mortgage rates, and a halt in its increase might indicate a relative ease in mortgage rates in 2024.
Despite this potential respite, affordability challenges will persist in 2024. Low housing inventory and high demand will keep the prices inflated until the Federal Reserve decides to reduce the federal funds rate.
Housing Market Recovery: A Long Road Ahead
For a substantial recovery in the housing market, several conditions need to unfold. Firstly, inventories for homes for sale need to increase significantly. This would alleviate the upward pressure on home prices, stabilizing them or even causing a slight dip from peak levels.
Secondly, interest rates need to cool down. However, a sudden drop in rates could create a demand surge, eradicating any inventory gains and causing home prices to rebound. It would be better if rate reductions occur at a gradual pace, improving buyer opportunities over time.
Key Housing Market Statistics
- The median home-sale price as of September 2023 was $394,300, up by 2.8% from one year ago.
- The nation had a 3.4-month supply of housing inventory as of September, which is low enough to be considered a seller’s market.
- The average rate on a 30-year mortgage was 7.69% as of November 8, 2023.
Housing Sales: A Downturn in Volume
While home prices remained firm in 2023, the volume of home sales significantly declined. Existing-home sales in September 2023 dropped to an annual pace of 3.96 million, a 15.4% drop year-over-year.
However, this trend might pivot in 2024 if mortgage rates drop. Lower mortgage rates would attract more buyers and sellers to the market, leading to increased transactions.
Housing Inventory: A Continued Struggle
Housing inventory remained very low throughout 2023. The total number of existing homes for sale as of September was 1.13 million units, an 8.1% decline since last year. This figure represents only a 3.4-month supply, far short of the 5 to 6 months usually required for a balanced market.
For significant improvement in inventory levels, a surge of homeowners listing their properties or a considerable amount of new-construction homes hitting the market is necessary. Although both scenarios seem unlikely, some increase in housing inventory is anticipated for 2024.
Housing Prices: A Steady Climb
Housing prices have been increasing lately, reaching historic highs. The median price in September of $394,300 was only about $20K short of the highest monthly home price ever recorded ($413,800, set in June 2022).
But will home prices decrease in 2024? Probably not. Experts predict that home prices will rise around 3 to 4% in 2024.
Buyer’s or Seller’s Market in 2024?
The tight inventory in the current market gives sellers an advantage. There are more buyers than available homes, making every new listing a hot commodity. Without a significant increase in inventory, it seems unlikely that the seller’s market will change in 2024.
Bottom Line on the 2024 Housing Market
The 2024 housing market might pose challenges for both buyers and sellers due to high mortgage rates, steep home prices, and low inventory levels. However, if rates decrease in 2024, as some experts predict, then market activity should heat up.
FAQs
Will there be a housing market crash in 2024?
Most experts do not foresee a housing market crash in 2024. Lending standards are stricter now than before the Great Recession, and with continued low inventory and high demand, the housing market is unlikely to enter a recession in the forthcoming year.
Is 2024 a good time to buy a house?
Many prospective homebuyers have chosen to wait out 2023, hoping for a more favorable market in 2024. However, with persistently high mortgage interest rates and low housing inventory, 2024 might still be a challenging time to buy a house. If rates decrease, though, the landscape might change, making purchases more affordable for buyers and encouraging homeowners to sell, which would add much-needed inventory to the market.
Conclusion
Predicting the housing market’s trajectory in 2024 remains a complex task due to the intricate interplay of several economic and market factors. However, prospective homebuyers and sellers must stay informed about market trends and make decisions based on their personal financial situations and long-term goals.