2024 Housing Forecast and Projections

The real estate industry has experienced significant ups and downs in recent years, leaving many uncertain about what the future holds. However, the National Association of Realtors (NAR) and Fannie Mae have offered their predictions for the real estate market in 2024. While these forecasts are not guaranteed, they provide insights into what may lie ahead. 

1. No housing bubble in sight

Last year, I made a prediction that there would be no housing bubble, and it turns out I was right. Now, I'm reiterating this forecast because the market performed even better than expected in 2023. Despite the combination of continued price growth and higher mortgage rates, I find it highly unlikely that the market will implode in 2024.

2. Gradual decline in mortgage rates

The U.S. economy has shown remarkable resilience, prompting the Federal Reserve to indicate that they will maintain higher mortgage rates to combat inflation. However, recent data suggests that inflation and the broader economy are starting to slow down, which should allow for a gradual easing of mortgage rates in 2024. Nevertheless, I anticipate that rates will only drop to around 6% by the end of the year.

3. Modest increase in listing activity

While I expect a modest uptick in listing activity in 2024, many homeowners may be hesitant to sell and lose their current favorable mortgage rates. Currently, 80% of mortgaged homeowners in the U.S. have rates at or below 5%. However, when rates fall to within 1.5% of their current rate, some homeowners will be motivated to make a move.

4. Marginal rise in home prices

Contrary to the predictions of many, home prices did not decline in 2023 due to the limited housing inventory. Given the unlikelihood of a significant increase in the number of homes for sale, I do not anticipate a drop in prices in 2024. However, I expect a very modest growth rate of 1%, which is the slowest pace seen in years, but growth nonetheless.

5. Recovery of home values in previously affected markets

During the pandemic, certain more affordable markets across the country experienced significant price increases followed by declines. I initially expected these areas to take longer to recover compared to the rest of the nation, but I have been pleasantly surprised by how quickly they have bounced back. In 2024, I anticipate that prices in the majority of metro areas will either match or exceed their 2022 highs.

6. Increase in market share for new construction

While new construction activity remains lukewarm, builders are benefiting from the limited supply in the resale market and are capturing a larger share of listings. Although this may seem positive for builders, it comes at a cost, such as lower list prices and increased incentives like mortgage rate buy downs. Despite a slight softening in material costs, builders will still struggle to meet the demand for housing.

7. Housing affordability continues to decline

As home prices continue to rise at a faster pace than income growth, coupled with the relentless increase in borrowing costs, housing affordability is expected to deteriorate further in 2024. To improve affordability, significant drops in home values, mortgage rates, or substantial increases in household incomes would be required. Unfortunately, the likelihood of these scenarios is very low, posing a challenge for first-time home buyers.

8. Government must prioritize housing

There has been a recent shift towards the government taking housing and affordability more seriously, with some states implementing new land use policies to release developable land. In 2024, I hope to see cities and counties continue to ease their restrictive land use policies. Additionally, streamlining the permitting process and reducing fees charged to builders should be prioritized, as these costs directly impact home buyers and further hinder affordability.

9. Foreclosure activity's minimal impact

Many anticipated that the end of forbearance would result in a flood of homes hitting the market, but that hasn't been the case. At its peak, nearly 1 in 10 homes in America were in forbearance, but that number has now dropped below 1%. Although foreclosure starts have increased, they still remain well below pre-pandemic levels. While delinquency levels are expected to rise in 2024, they will only be returning to the long-term average and should not be a cause for concern.

10. Sales on the rise, but still historically low

2023 will be remembered as a year with the lowest home sales since the housing bubble burst in 2008. In 2024, I anticipate a modest improvement in the number of homes for sale, coupled with declining mortgage rates, resulting in approximately 4.4 million home sales. However, the demand will continue to outpace supply, meaning that sellers will still maintain the upper hand in the market.

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