From soaring home prices to skyrocketing mortgage rates, the United States real estate market has been on quiet a roller coaster in recent years. Just to make the landscape even more challenging to navigate for the market’s buyers and sellers. In this article, we will delve into the predictions, trends and factors that the U.S. real estate experts, economists & analytics have predicted we can expect in the American real estate market in 2024.
The Current State of the Housing Market
Despite the significant increase in mortgage rates in 2023, the housing market experienced a surge in home prices. Accordingly to Lawrance Yun, the Cief Economist at the National Association of Realtors (NAR), the limited supply of homes combined with high demand, has created an environment where prices continue to rice. He also stated, “There are simply not enough homes for sale.”, emphasizing the lack of availability as a key driver of the market.
Forecasted Home Price Trends & Impact of Mortgage Rates
With no surprise, various research firms have provided forecasts for home prices in 2024. While there are slight variations in their predictions, most expect prices to continue rising. On the higher end, the real estate listing marketplace Zillow has projected a 4.9% increase in home prices, revised from their previous 6.5% due to anticipated higher mortgage rates. AEI Housing Center expects a more significant increase in home prices, with a 6% rise in 2023 and a 7% jump in 2024.
“Elevated mortgage rates are weighing on new listings with ‘rate-locked’ homeowners largely opting to hold onto the relatively low monthly payment associated with their current home,” wrote Zillow economists.
Similarly, Goldman Sachs foresees a more modest home price increase of 1.3% in 2024, while Moody’s Analytics and Morgan Stanley on the other hand, predict a slight decline in American home prices. There is also a possibility of a slight decrease of mortgage rates by the transition between 2023/2024, but they will still stay elevated.
One of the other major factors & drivers influencing the housing market in 2024 other than supply & demand, will be mortgage rates. While the majority of mortgage borrowers currently have mortgage rates below the current market rate, Goldman Sachs predicts that sustained higher mortgage rates will have a significant impact on housing turnover. The fact that the rates are the highest since 2002, further tightens the supply of homes in an already tight housing market.
These factors combined will create a challenging environment for buyers. It looks like it will continue to be a Seller’s market the coming years ahead.
The combination of higher mortgage rates and limited supply is expected to lead to a decline in home sales throughout the country. Already in September 2023, existing home sales experienced a drop of 15%. A significant change reaching the lowest level since 2010 in the post-Financial Crisis America.
Goldman Sachs is projecting that this trend is most likely to continue. According to their analytics, previously owned home sales are projected fall to their lowest level since the early 1990s—with only 3.8 million home sold—in 2024.
Housing Supply and Construction
The limited supply of homes has been a persistent issue in the U.S. real estate market. The fundamental problem is that housing production has been unable to keep pace with household formations since the Financial crisis of 2008-2009, when the number of new housing units dropped significantly. Demand has simply outpaced supply ever since then.
However, the construction of multi-family units has grown due to an unsustainable high level of production in 2022 up 15% since previous year, according to the National Association of Home Builders (NAHB).
Goldman Sachs forecasts a decline of 4% in housing starts in 2024 because of fewer multifamily starts. However, the bank expects new-lease rent growth to rise, indicating sustained demand.
Importance of Local Real Estate Agents
Navigating the real estate market is very complex for Joe & Jane Doe, and Americans are using real estate agents more than ever before, even among the younger generation. As of 2022, 86% of sellers were assisted by a real estate agent when selling their home, and 73% of the surveyed clients would definitely use the the same real estate agent again, according to the 2022 National Association of REALTORS® Profile of Home Buyers and Sellers.
Although the average home seller in 2020 was 60 years of age, a study performed by Harris Insight shows that it’s actually the older generation that cuts the agent off. Not the tech savvy millennials.
The Future of Rent Prices
Rent prices have also been affected by the housing market conditions. Despite an increase in rental vacancies, Goldman Sachs expects rent prices to continue rising. The bank forecasts a 3% annual growth in new-lease rent, indicating sustained demand for rental properties.
Navigating the 2024 Real Estate Market
As we enter 2024, real estate buyer and sellers should prepare for a more challenging real estate market. Limited housing supply, increased mortgage rates and the general public’s affordability concerns will require careful strategic decision making by the buyer. It is after all a market that favors the seller. Relying on the expertise of local real estate agents and staying informed about market conditions will be crucial for as successful transactions as possible, for both parties.
The real estate market forecast for 2024 indicates continued price increases nationwide, limited housing supply, the impact of increased mortgage rates on average Joe. While there are varying predictions, it is clear that navigating the market will require careful planning and guidance from experienced professionals. By staying informed and working with local agents, buyers and sellers can make the best of the current situation in this dynamic market.
