An Uncertain Path: What the 2024 Housing Sector Holds

With elevated mortgage rates and peak home prices, not to mention the scarcity of properties on the market, both potential sellers and aspiring buyers are feeling on edge about the current state of the housing market.

Market Statistics as of Mid-2023

• As of July 2023, the average selling price for a pre-existing home in the U.S. reached an unprecedented $406,700, according to information from the National Association of Realtors (NAR).
• Mortgage interest rates soared to a two-decade high of 7.36% by late August 2023.
• A snapshot of the housing market as of July 2023 revealed an insufficient 3.3-month supply of residential property, confirming it as a seller’s market.

The Influence of Mortgage Rates on the 2024 Market

The Federal Reserve’s efforts to combat inflation have led to a surge in mortgage rates, although the rates may decline soon. Orphe Divounguy, a lead economist at Zillow, suggests that the Federal Reserve may soon halt its inflation measures, which could potentially lead to a drop in mortgage rates.

Chen Zhao, who oversees the economic department at Redfin, adds that while inflation rates are expected to drop slightly, they will likely remain higher than the Federal Reserve’s target range. For the housing sector, this means that buyers will still face affordability issues while sellers will be hesitant to give up their existing low mortgage rates.

The Future of Home Sales and Inventory

Despite relatively high home prices, the volume of property sales has seen a substantial decrease. Lawrence Yun, NAR’s chief economist, anticipates that if mortgage rates decrease as expected, this could encourage more buyers and sellers to enter the market, thus boosting activity.

Selma Hepp, CoreLogic’s chief economist, echoes this sentiment, stating that lower mortgage rates could drive a surge in property listings, which is much needed in the current market environment.

Will Housing Prices Decrease?

The scarcity of homes for sale is unlikely to change soon, and this could keep prices high. Yun suggests that home prices could even see an uptick of 3 to 4% in the upcoming year.

Seller’s Market or Buyer’s Market?

In the current landscape, sellers have a distinct advantage due to the limited inventory. Zhao adds that supply is expected to remain below the balanced market level, making it a seller’s market for the foreseeable future.

2024 Market Outlook

The coming year poses challenges for both buyers and sellers due to a combination of high mortgage rates, elevated property prices, and limited inventory. However, if mortgage rates do decrease, we could see increased market activity.

For those planning to venture into the housing market in 2024, the counsel of an experienced local real estate professional is invaluable.