Summary
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- 2023 Housing Market Overview: After a volatile 2021-22, 2023 saw a dramatic slowdown with a 19% drop in existing home sales while median prices climbed to $387,600.
- 2024 Projections: Predictions for 2024 include a slight decline in mortgage rates to 6.5–6.8%, potentially boosting modest home sales, but low inventory will constrain significant growth.
- Home Price Forecast: Median prices are expected to drop 1–2% to $375,000–$385,000, pressured by improving affordability and increased supply, although regional variations will occur.
- Market Dynamics: Persistent inventory shortages favor sellers, with buyers needing to make concessions in bidding wars. Major events could alter trajectories, but overall market conditions are unlikely to change fundamentally.
In this special installment of The Full Measure with Kevin Hecht, uncover 2024 housing market predictions, economic insights, and recommendations for residential appraisers.
After a volatile 2021–2022 period, the U.S. housing market in 2023 slowed dramatically, with existing home sales plunging 19% year-over-year. While moderating from peak levels, home prices climbed to a median of $387,600 in November 2023, up 4% from 2022. Meanwhile, mortgage rates averaged around 6.9% for the year after spiking over 7% in late 2022.
As we enter 2024, projections call for a mixed picture of continuity and change. Mortgage rates are expected to slowly decline to an average of 6.5–6.8% for the year as inflationary pressures ease. This could boost home sales modestly, but persistent low inventory will constrain significant growth. Home prices are forecast to dip around 1–2% by most measures.
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Housing market predictions for 2024
Mortgage rates
The 30-year fixed mortgage rate is predicted to average 6.5–6.8% over the course of 2024, declining from the 2023 average of 6.9%. This retreat will occur as inflation falls, allowing the Federal Reserve to halt interest rate hikes. However, rates dropping substantially below 6% in 2024 is unlikely barring an economic downturn. The small rate declines expected will aid affordability to a minor degree after the surge in housing costs for buyers in 2022–2023. But far higher expenses than pre-2020 norms will remain.
Home prices
The median existing-home sale price reached an all-time high of $413,800 in June 2022 before declining, then rebounding to end 2023 up 4% for the year at $387,600. For 2024, projections call for national median prices dropping between 1–2% to approximately $375,000–$385,000. Slowly improving affordability from lower rates and more supply satisfying purchase demand is expected to pressure prices down. However, years of underbuilding and tight inventory will prevent steeper decreases. Local conditions will vary, especially in overheated pandemic boom areas where larger declines are possible.
Existing home sales
Sales of previously-owned homes jumped in 2020–2021, while 2022 saw demand slow and plummet as affordability deteriorated. 2023 sales declined 19% year-over-year, with December 2023 annualized volume at 3.95 million units compared to 4.88 million in December 2022. In 2024, forecasts range from sales remaining flat to rising to 5% should rates fall further, increasing purchasing power for buyers. However, chronic shortages of homes to buy will limit sales growth upside potential. At best, sales seem set to recover only slightly from 2023’s projected 4.07 million total to the low 4 million range at above 2021 levels.
Housing inventory
Tight inventory was a defining feature of 2021-2023 housing markets, with monthly supply consistently remaining below 5 months, half the level considered a balanced market. December 2023 saw inventories of existing homes for sale at just 1.03 million, a 4.4-month supply down 6% from 2022. For 2024, limited relief is predicted as moderately improving buyer affordability persuades more owners to list homes. However, December 2024 inventory may still be up to 14% below 2023 totals. New construction also continues to lag household formation by wide margins. Consequently, buyers will still face constrained choices.
Buyer vs. seller market
The persistent gap between buyers and homes for sale, especially at lower to mid-level prices, strongly favors sellers and spells no fundamental market dynamics change in 2024. Buyers should expect to make concessions on closing costs, inspection contingencies, and other buyer-friendly terms to win bidding wars that may be only modestly less heated. If mortgage rates or inventory conditions significantly outperform current forecasts, buyer negotiating leverage may incrementally improve.
Wildcards
As recent years proved unpredictable, major economic or global events could alter the 2024 housing market trajectories. Potential risks with upsides or downsides for prices and sales include quicker inflation reductions, faster rate declines, higher energy costs from conflicts, and election cycle impacts.
For residential real estate appraisers
Here are some key insights and recommendations for residential appraisers in 2024:
- Be aware of the modest decrease in home prices and adjust accordingly.
- Consider the increasing housing supply and its impact on property values.
- Keep abreast of mortgage rate trends and affordability issues as they influence market dynamics.
- Stay informed about the rental market trends, especially the demand for different types of rental units.
- Understand regional market variations and how factors like climate risk and ‘boomerang migration’ affect property values.
- Monitor changes in real estate transaction processes and technology integration.
- Stay updated on political and economic influences that could impact the housing market.
While incremental relief from peaks is probable based on 2024 housing market predictions, sizable shifts towards more buyer-friendly conditions appear unlikely, absent unforeseen volatility triggers. Home prices and mortgage rates descending from records paired with inching inventory increases may restore some sales activity. Still, supply shortfalls and costs above historical norms critically limit market rebalancing potential. Consequently, the defining theme remains one of chronic inadequacy of affordable inventory to meet purchase demand.
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Written by Kevin Hecht. Kevin has been a real estate appraiser since 1987, and currently holds a Certified Residential appraiser license in Missouri. As a McKissock Learning instructor, Kevin specializes in market analysis, USPAP, and real estate economics. In addition to being an appraiser, Kevin is an Adjunct Professor of Economics at Maryville University.
