The housing market in 2023 was marked by the "mortgage rate lock-in effect," which had a significant impact on inventory levels and home sales. However, as we look ahead to 2024, experts are predicting some positive changes on the horizon. In this article, we will dive into the insights shared by six experts in the real estate industry regarding the outlook for the housing market in 2024.
Signs of Improvement
After witnessing a steady drop in mortgage rates over the past seven weeks, there is reason to be optimistic. According to Freddie Mac, the average 30-year fixed mortgage rate was 6.61% as of the end of December. This decline in rates has already had a positive impact on existing-home sales, which saw a 0.8% increase in November, breaking a streak of five consecutive monthly declines, as reported by the National Association of Realtors.
Image: A home for sale in Palm Beach, Florida
Housing Shortages to Continue
Despite the signs of improvement, one thing that most experts agree on is the continuation of housing shortages. Danielle Hale, chief economist for Realtor.com, predicts that although there will be a small increase in single-family home construction and the completion of numerous multifamily units, the shortage of homes for sale will persist. This additional inventory will help stabilize prices, but it will take many years of accelerated new home construction to bridge the supply shortage gap caused by a decade of underbuilding, as stated by Odeta Kushi, deputy chief economist at First American.
Image: Danielle Hale, chief economist for Realtor.com
Market Variations
Real estate activity in 2024 is expected to vary significantly from market to market. Hale suggests that affordable markets in the Midwest and Northeast, such as Toledo, Ohio, and Rochester, New York, will experience double-digit growth. Similarly, Southern California, with its potential reduction in mortgage rates, could see significant improvement after a slow 2023. However, nationwide sales are expected to see only a modest uptick over the long-term low of 2023.
The median existing-home price for all housing types in November 2023 was $387,600, which is a 4% increase from the previous year. It is worth noting that all four U.S. regions posted price increases. Lawrence Yun, Chief Economist at the National Association of Realtors, believes that only a substantial rise in supply will dampen price appreciation.
Mortgage Rates and Affordability
Experts predict that the average 30-year mortgage rate will hover between 6.1% and 7% in the first quarter of 2024 before gradually declining throughout the year. Daryl Fairweather, Chief Economist at Redfin, suggests that mortgage rates will fall to around 6.6% by the end of 2024, providing some relief to homebuyers. However, election year volatility could result in fluctuations in mortgage rates.
Image: Daryl Fairweather, Chief Economist at Redfin
New Home Construction
Robert Dietz, Chief Economist for the National Association of Home Builders, predicts a rise in single-family housing construction starts in 2024. This is significant as it marks the first year of growth after declines in 2022 and 2023. With low existing inventory, new construction has become a significant portion of the single-family inventory. However, the multifamily construction sector is expected to experience a decline due to tight financing conditions.
Image: Robert Dietz, Chief Economist for National Association of Home Builders
As we move into 2024, it is clear that the housing market will continue to face challenges, such as housing shortages and fluctuating mortgage rates. However, with improvements expected in some markets and an increase in new construction, there is hope for potential homebuyers and sellers. Stay tuned for updates as we navigate through the ever-evolving real estate landscape.
Swapna Venugopal Ramaswamy is a housing and economy correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.
