As 2023 nears its end, with mortgage rates slowing to the mid-7%s but home prices at record highs, the question on housing analysts’ minds is: Will 2024 be any better?
For the most part, experts see a mixed bag coming next year, predicting the beginning of a turnaround that won’t fully flower until 2025.
Realtor.com’s 2024 Housing Forcast suggests mortgage rates will moderate and ultimately average 6.8%, hitting 6.5% at year-end, while home prices ease slightly by 1.7%. But the company also predicts worsening inventory shortages as homebuyers cling to their current homes to keep their sub-5% rates.
Still, Danielle Hale, chief economist for Realtor.com, emphasizes the bright sides of softening unaffordability.
“Our 2024 housing forecast reveals the green shoots we’ve been waiting to see in the housing market and should give buyers some optimism after a grueling few years,” she said.
“Moves of necessity – for job changes, family situation changes, and downsizing to a more affordable market – are likely to drive home sales in 2024. Home buyers will continue to seek out markets where they feel like they get the most out of their dollar as they look for homes that better meet their needs.”
Mark Fleming at First American Financial has a similarly glass-half-full view of next year’s market.
First American expects wage growth to slow in the coming year while home price appreciation continues to soar, putting pressure on buyers.
However, price growth should slow to +3-4%, closer to historical averages, while mortgage rates sink to the mid-6%s, making housing about 5% more affordable based on FirstAm’s Real House Price Index.
“However, even at this level, affordability will remain more than 40% worse than in February 2022, just before the Fed started increasing rates,” Fleming said. “In 2024, the housing market will not be pandemic hot, nor monetary-tightening cold, but it may not be quite right either.”
This mirrors Fannie Mae’s prediction of a minor recession hitting the U.S. economy at the beginning of the year, followed by a rate cooldown in 2024 and ultimately a “gradual recovery in home sales into 2025.”
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