What to expect from the housing market in 2024

2024 might be a little more kind to prospective home buyers, homeowners and renters than in 2023.

The housing market was downright hostile to hopeful movers in 2023. With average mortgage interest rates hitting 8% in mid-October 2023 and the median sales price for an existing home is the U.S. was $387,000 as of November 2023. Over the last two months however, the 30-year fixed interest rate (on average) has dropped just about an entire percentage point.

Overall home prices, mortgage rates and inventory levels will shape housing affordability in the coming year. In the last meeting of 2023, the Federal Reserve held interest rates steady, leaving the federal funds rate at a target range of 5.25%-5.50%. The FED also foreshadowed multiple rate cuts for the year of 2024. Given this, many industry professionals optimistically believe we will see some type of relief when it comes to housing affordability in the United States.

Will home prices go down?

Although we're seeing some of the highest interest rates we have seen in the last several years, housing prices have still been on fire. November's median home sale price of $387,000 was only $26k short of the highest monthly home price NAR (The National Assocication of REALTORS®) ever recorded; $413,800 set in June 2022.

Unfortunately, It's likely home sale prices will stay about the same during 2024. Housing prices are connected to inventory, but they're also connected to demand. If the interest rates contiue to go down, many prospective homebuyers who have been waiting for a dip in the interest rates will start up their searches again and we'll start to see more competition in the market. In order forhome prices to start to fall, demand for said housing must start to fall. However, year over year this is unlikely.

Will housing inventory increase?

Although demand for housing went down slightly during 2023, the housing supply remained very low throughout the year. The overall existing homes on the market as of November 2023 represents only a 3.5-month supply of homes - which is still far short of the ideal 5-6 monthssupply needed for a balanced market.

In order to alleviate the shortage of inventory, there needs to be a surge of either homeowners listing their existing homes for sale or builders listing a huge amount of new-construction homes.

The challenge we have been facing is those that either locked a historically low interest rate during a purchase or during a refinance over the last few years OR own their home free and clear, likely have no reason to sell - what would keep them from renting out the home and buying a new one if they needed to move? Or just staying put? With the propective change in interest rates, many industry professionals are hoping that this allows a little bit more movement in the market therefore bringing potentially more inventory.

Will it be a buyer's market or a seller's market?

Although demand was lower in 2023 than it was in years past, we're still considered to be in a seller's market based off of the shortage of inventory. Sure, now you may be able to negotiate a little more than you could have in 2021, but we're still continuing to see multiple offer situations.

Given expectations about interest rates and supply, demand for homes is likely to exceed supply similar to the last few years. Meaning, we're likely to continue to see a seller's market for the forseeable future, including most if not all of 2024.

Key Takeaways

The complexities of the current housing market conditions mean that now, more than ever, it's extremely important to lean on the guidance of professionals in the industry. With the combination of higher that usual interest rates, steep home prices, low inventory and inflation, the housing market can be challenging for both buyers and sellers to navigate. There is really never a "good" or "bad" time to buy or sell real estate - especially when it happens to be your primary residence. If you're considering a move in 2024, now is the time to get prepared and better understand what to expect with the housing market over the next few months. Whether that be preparing your current home for sale or getting your financing in line for a purchase, it's never too early to start getting the ball rolling.