According to My Home Navigators’ research, the U.S. housing market experienced a significant slowdown in 2023 following a tumultuous period spanning 2021–2022, witnessing a substantial 19% year-over-year drop in existing home sales. Despite this moderation from peak levels, home prices continued to rise, reaching a median of $387,600 in November 2023, marking a 4% increase from 2022. Meanwhile, mortgage rates, which had spiked over 7% in late 2022, averaged around 6.9% for the year.
As we step into 2024, the outlook presents a nuanced blend of continuity and change. Projections indicate a gradual decline in mortgage rates to an average of 6.5–6.8% for the year as inflationary pressures ease. This potential reduction could modestly stimulate home sales, yet the persistently low inventory is expected to impede significant growth. Predictions also foresee a slight dip in home prices, ranging from 1–2% by most measures.
My Home Navigators' Housing Market Predictions for 2024
Mortgage Rates
Anticipated to average 6.5–6.8% throughout 2024, a decline from the 2023 average of 6.9%. This retreat aligns with the easing of inflation, allowing the Federal Reserve to halt interest rate hikes. Although substantial drops below 6% are unlikely, the expected minor rate decreases may offer limited relief in affordability compared to the surging housing costs experienced by buyers in 2022–2023.
Home Prices
After reaching an all-time high of $413,800 in June 2022, the median existing-home sale price rebounded to end 2023 at $387,600, up 4% for the year. Projections for 2024 suggest a 1–2% drop, with national median prices ranging between $375,000–$385,000. Improved affordability from lower rates and increased supply satisfying demand are expected to exert downward pressure on prices based on My Home Navigators’ research, although the years of underbuilding and tight inventory will prevent steeper declines, especially in overheated pandemic boom areas.
Existing Home Sales
After a surge in 2020–2021, demand slowed in 2022 due to deteriorating affordability, resulting in a 19% year-over-year decline in 2023. Forecasts for 2024 vary, with sales potentially remaining flat or rising up to 5% if rates decline further. However, persistent shortages of available homes will limit sales growth potential, and recovery may be modest, reaching the low 4 million range above 2021 levels.
Housing Inventory
Tight inventory characterized the 2021–2023 housing markets, with monthly supply consistently below 5 months. December 2023 saw existing home inventories at just 1.03 million, a 4.4-month supply down 6% from 2022. While 2024 predicts limited relief as buyer affordability improves, December inventories may still be up to 14% below 2023 totals, with new construction lagging behind household formation.
Buyer vs. Seller Market
The persistent gap between buyers and available homes, especially in lower to mid-level price ranges, continues to favor sellers in 2024. We here at My Home Navigators think that buyers may need to make concessions on closing costs, inspection contingencies, and other terms to secure properties in bidding wars that, while potentially slightly less intense, are unlikely to undergo fundamental changes. Incremental improvements in buyer negotiating leverage may occur if mortgage rates or inventory conditions outperform current forecasts.
Wild Cards
Given the unpredictability of recent years, the 2024 housing market trajectories could be influenced by major economic or global events. Upsides or downsides for prices and sales may stem from factors such as quicker inflation reductions, faster-than-expected rate declines, increased energy costs due to conflicts, and impacts from the election cycle. These unforeseen elements introduce a level of uncertainty into the market dynamics for the coming year.
For Residential Real Estate Appraisers
Here are some key insights and recommendations for residential appraisers in 2024:
- Be mindful of the slight decline in housing prices and make necessary adjustments.
- Take into account the rising housing supply and its influence on property values.
- Stay informed about the trends in mortgage rates and affordability issues, as they play a crucial role in shaping market dynamics.
- Stay updated on rental market trends, particularly the demand for various types of rental units.
- Recognize regional market fluctuations and the impact of factors such as climate risk and ‘boomerang migration’ on property values.
- Keep track of developments in real estate transaction procedures and the integration of technology – you can use My Home Navigators website to do this too.
- Stay informed about political and economic factors that might affect the housing market.
Closing Notes
While there is a likelihood of gradual relief from the peaks according to the 2024 housing market forecasts, significant transitions towards more favorable conditions for buyers seem improbable unless unforeseen volatility triggers come into play. The descent of home prices and mortgage rates from previous highs, coupled with marginal increases in inventory, might contribute to a modest revival in sales activity. Nevertheless, persistent shortages in supply and costs exceeding historical norms act as crucial constraints, limiting the potential for a substantial rebalancing of the market. As a result, the prevailing theme continues to be one of chronic inadequacy, with a persistent shortage of affordable inventory to meet the demand for home purchases.
Read our previous blog post at My Home Navigators about the resurgence of Housing Market sales at the bottom half of the fourth quarter of 2023.
