Realtor.com has released its 2024 Housing Forecast, revealing that lower mortgage rates and easing home prices could spark the beginning of an affordability turnaround. However, the supply of existing homes is expected to remain tight, and renting will continue to be a competitive option in most markets.
According to the forecast, buyers and sellers can anticipate average mortgage rates of 6.8% in 2024, with rates predicted to edge down to 6.5% by year’s end. Home prices are expected to ease slightly, dropping by 1.7% following consistent increases since 2012. Meanwhile, rents are projected to drop by 0.2%, making renting a more budget-friendly option than buying in most markets. Notably, inventory is expected to drop by 14% year-over-year as existing homeowners with low mortgage rates choose to stay put. Home sales are expected to hold steady, rising 0.1% year over year to 4.07 million.
The forecast also highlights key trends and potential wildcards for 2024. The typical monthly purchase cost for a median-priced home listing is expected to be slightly less than $2,200/month, or about 35% of the typical household income. This marks an improvement from 2023, when purchase costs consumed nearly 37% of income. This improvement in affordability may provide some buyers with the opportunity to break into the market.
However, the number of unsold homes on the market is expected to remain low due to relatively low home sales activity. If rates drop faster than expected, this could motivate more homeowners to sell, bringing more homes to the market than forecasted.
In 2024, an increase in new rentals will push vacancy higher, closer to the 7.2% average seen from 2013-2019. Despite the increase in rental options, the median asking rent in 2024 is expected to drop only slightly below its 2023 level (-0.2%).
Sellers will need to compete with new housing as single-family home housing starts are expected to increase by an estimated 0.4% in 2024. Sellers are advised to consider the new construction market in their area to ensure competitive pricing and marketing.
The forecast also notes potential wildcards, including geopolitical events and inflation. Conflicts in Ukraine and the Middle East could affect the global economy in unpredictable ways. Domestically, the uncertainties of the 2024 election season could have an impact. Inflation is expected to subside, but any reversal of this trend could raise long-term interest rates, potentially nudging mortgage rates higher than expected.
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