Top 10 Housing Predictions for 2024

Economist Matthew Gardner gives his top 10 predictions for the housing market in 2024. If you’re interested in learning about some local predictions for Pierce County, join us in the 2024 South Sound Housing Forecast by RSVPing using the link here.

The market performed better in 2024 than expected, and although there is a continued price growth combined with significantly higher mortgage rates, it is still predicted that there will be no housing bubble.

The U.S. economy has been remarkably resilient, which has led the Federal Reserve to indicate that they will keep mortgage rates higher for longer to tame inflation. But data shows inflation and the broader economy are starting to slow, which should allow mortgage rates to ease in 2024. It is predicted that rates will only fall to around 6% by the end of the year.

There is a predicted modest increase in listing activity in 2024, yet many homeowners will be hesitant to sell and lose their current mortgage rate. The latest data shows 80% of mortgaged homeowners in the U.S. have rates at or below 5%. Although they may not be inclined to sell right now, when rates fall to within 1.5% of their current rate, some will be motivated to move.

While many forecasters said home prices would fall in 2023, that was not the case, as the lack of inventory propped up home values. Given that it’s unlikely that there will be a significant increase in the number of homes for sale, don’t expect prices to drop in 2024. However, growth will be a very modest 1%, which is the lowest pace seen for many years, but growth all the same.

During the pandemic there were a number of more affordable markets across the country that experienced significant price increases, followed by price declines post-pandemic. In 2024, expect prices to match or exceed their 2022 highs in the vast majority of metro areas across the country.

Although new construction remains tepid, builders are benefiting from the lack of supply in the resale market and are taking a greater share of listings. While this might sound like a positive for builders, it’s coming at a cost through lower list prices and increased incentives such as mortgage rate buy downs. Although material costs have softened, it will remain very hard for builders to deliver enough housing to meet the demand.

With home prices continuing to rise and the pace of borrowing costs far exceeding income growth, affordability will likely erode further in 2024. For affordability to improve, it would require either a significant drop in home values, a significant drop in mortgage rates, a significant increase in household incomes, or some combination of the three. However, this is very unlikely. First-time home buyers will be the hardest hit by this continued lack of affordable housing.

The government has started to take housing and affordability more seriously, with several states already having adopted new land use policies aimed at releasing developable land. In 2024, hope cities and counties will continue to ease their restrictive land use policies, continue to streamline the permitting process, and reduce the fees that are charged to builders, as these costs are passed directly onto the home buyer, which further impacts affordability.

Many expected that the end of forbearance would bring a veritable tsunami of homes to market, but that didn’t happen. At its peak, almost 1-in-10 homes in America were in the program, but that has fallen to below 1%. That said, foreclosure starts have picked up, but still remain well below pre-pandemic levels. Look for delinquency levels to continue rising in 2024, but they will only be returning to the long-term average and are not a cause for concern.

2023 will likely be remembered as the year when home sales were the lowest since the housing bubble burst in 2008. Expect the number of homes for sale to improve modestly in 2024 which, combined with mortgage rates trending lower, should result in about 4.4 million home sales. Ultimately though, demand exceeding supply will mean that sellers will still have the upper hand.