What Homebuyers Should Know To Navigate The 2024 Housing Market

Amidst the backdrop of mortgage rates hitting their highest levels in two decades and a significant drop in housing inventory last year, numerous prospective homebuyers are eager to transition from the sidelines to homeownership.

While there are indications that 2024 could offer improvements in the housing market, affordability remains a significant concern for many potential buyers. For those considering purchasing a home this year, understanding the housing market predictions for 2024 is crucial. Experts generally anticipate an increase in home prices during the year.

Fannie Mae forecasts a 3.2% year-over-year rise in home prices by the end of 2024, while the Mortgage Bankers Association suggests a potential increase of up to 4.1%. The National Association of Realtors holds a more conservative estimate, predicting a modest 1.4% increase in existing-home prices for the year.

The persistent issue of low home inventory in the United States has consistently propped up home prices, even amidst last year's peak mortgage rates and decreased homebuying demand. While demand is expected to rise in 2024, any potential decrease in home prices may not be significant enough to substantially improve affordability. However, experts anticipate a potential avenue for increased affordability through declining mortgage rates. These rates have already begun to decrease from their peaks last fall, with further declines anticipated throughout 2024. It's projected that the average 30-year fixed mortgage rate could potentially drop to around 6% by the end of the year.

Fannie Mae suggests a significant decrease in rates, with expectations that 30-year fixed rates could fall to the low 6% range during the typical homebuying season and potentially reach 5.8% by the end of 2024. The MBA's forecast is slightly less aggressive, indicating mortgage rates could hover between 6.3% to 6.6% during peak homebuying season before dropping to 6.1% by year-end. NAR predicts rates will be in the mid-6% range during the homebuying season, declining to 6.1% in the last quarter of the year.
The trajectory of mortgage rates in 2024 depends, in part, on the actions of the Federal Reserve in response to inflation. If the Fed opts to cut the federal funds rate, this could alleviate upward pressure on mortgage rates, allowing for more substantial decreases. However, the likelihood of a housing market crash in 2024 is relatively low, primarily due to the persistent issue of low housing inventory, which continues to sustain prices.

However, if Biden wins his reelection and changes his tune on pressuring the Federal Reserve pushing rates down or we witness a Donald Trump election in 2024 where he enacts policies that streamline regulations around construction and slashes interest rates, it could lead to a rapid resurgence in the housing market. With fewer regulatory barriers and lower borrowing costs, construction could increase, bolstering housing supply and potentially driving prices down. Additionally, lower interest rates would spur increased demand, further stimulating the housing market. This scenario could result in a quick turnaround from the challenges seen in previous years, illustrating the complex interplay between policy decisions and market dynamics in shaping the housing landscape.