Housing Market Predictions for 2024: When Will Home Prices Be Affordable Again?
Forbes shares housing market predictions.
According to Forbes, experts say the housing market will only see renewed momentum once mortgage rates drop enough to ease affordability challenges and incentivize homeowners locked in at low rates to move so inventory grows substantially to meet demand.
Housing Market Forecast for 2024
U.S. home prices posted a 5.9% annual gain for May, down from a 6.4% annualized gain in April, according to the latest S&P CoreLogic Case-Shiller Home Price Index. Yet, even as this annual gain marks a slowdown, the index still broke the previous month’s record high, indicating home prices are still out of reach for many.
“Affordability is the main constraint on the housing market,” Lisa Sturtevant, chief economist at Bright MLS, said in an emailed statement. “The market will move toward more of a balanced housing market in the second half of the year, but prospective home buyers will still face competition.”
Though affordability obstacles persist for buyers, other indicators suggest that the market is tilting toward buyers. Zillow reports that roughly 25% of its listings saw price cuts in June. The last time the rate was this high for cuts this time of year was in 2018.
Meanwhile, experts are hopeful that the Federal Reserve (Fed) will finally cut the federal funds rate in September, as inflation is cooling down sustainably toward the Fed’s 2% target.
Mortgage rates indirectly track this benchmark interest rate banks use as a guide for overnight lending. With the federal funds rate at its highest level in over two decades, mortgage rates—and borrowers—have been feeling the added impact on their ability to afford a home.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
Of course, mortgage rates would need to cool off, which seems promising given the recent declines. The average 30-year fixed mortgage rate has been below 7% since the first week of June and has largely trended down, landing at 6.46% in the week ending August 22.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
