2024 will be a better year for buyers — but how much better?
Forecasts from Realtor.com and Bright MLS offer varying degrees of optimism, with a split on inventory and an eye on wild cards like inflation and the election.
Key points:
- Mortgage rates should continue to drop, settling somewhere between 6-7%.
- The forecasts had mixed views on inventory, with Realtor.com expecting it to fall and Bright predicting an increase.
- Affordability may ease slightly but could remain challenging for buyers.
As housing market predictions began to roll in last year around this time, economists warned of a tough year ahead. But none of them expected mortgage interest rates to surge toward 8%, and some thought home prices would fall significantly, bringing more balance to the market.
Instead, buyers struggled with costly mortgages, stubbornly high home prices and limited inventory. Will they fare better in 2024? Two new forecasts say yes — but paint somewhat different pictures of the year ahead.
Realtor.com is expecting 2024 to show some improvement in the real estate market for buyers but remain quite challenging overall, with mortgage rates averaging 6.8% and inventory declining further. One notable bright spot: improved affordability. Realtor.com expects a home purchase in the new year to consume 35% of a household's monthly income, down from 37% in 2023.
"Our 2024 housing forecast reveals the green shoots we've been waiting to see in the housing market and should give buyers some optimism after a grueling few years," said Danielle Hale, chief economist at Realtor.com.
Bright MLS is more optimistic about mortgage rate levels and expects inventory to increase, but believes affordability will still be an issue as prices hold steady.
"After a very difficult market for buyers who have had to contend with an atypical housing market in 2023, home shoppers will find more listings to choose from in 2024," Bright MLS Chief Economist Lisa Sturtevant said, while cautioning that "both buyers and sellers will have to reset expectations next year."
A closer look at the numbers
Mortgage rates: Lower, but how much?
Realtor.com expects rates to average 6.8% and drop to 6.5% by year-end.
Bright thinks they'll average between 6-6.5% and fall to 6.2% at the end of the year.
Buyers will be watching these rate changes, with first-time homebuyers more likely to react to incremental drops.
"Even though we expect affordability to begin to turn around, buyers are still likely to feel stretched by elevated mortgage rates and prices and are likely to capitalize on mortgage rate declines," Hale said in an email. "As the mortgage rate trend shifts from generally increasing, to generally decreasing, however, it could diminish consumers' sense that they need to rush in right away."
Home prices: Relatively flat
Realtor.com expects prices to fall slightly on a national basis, decreasing by 1.7%.
Bright predicts prices will rise by a similar percentage (1.5%).
Inventory: Down… or up?
Realtor.com predicts inventory will fall 14% year-over-year due to the mortgage rate "lock-in effect" keeping sellers sidelined.
But Bright expects more of those homeowners holding low-rate mortgages to sell as family and financial circumstances force more moves, leading to a 7.6% rise in inventory.
If mortgage rates rise again in 2024, Hale expects demand to fade, and also believes inventory could fall further as homeowners have less of an incentive to move (unless they have to).
Home sales: Trending higher
Realtor.com expects home sales to hold steady, inching up just 0.1% to 4.07 million in 2024.
Bright forecasts a larger bump, with home sales ending the year at 4.6 million, an increase of 12.1% over 2023.
The wild cards
The economy didn't behave as expected in 2023, causing many economists — including Hale — to revise their forecasts midyear. Trying to get a read on real estate in 2024 could be just as challenging, because the economic cycle is at a potential pivot point.
What will the Federal Reserve do with interest rates as inflation remains elevated? Will there be an overcorrection, sending the economy into a recession? If the labor market cools off and unemployment goes up, that could lead to more inventory and cause home prices to fall — exceeding Realtor.com's prediction and contradicting Bright's forecast.
Another wild card? Global unrest, which has "the potential to affect the global economy in ways that can't be fully anticipated," noted the Realtor.com report. And here in the U.S., the uncertainty inherent in a presidential election season could have a ripple effect on the economy and housing market.
The Bright report expects "a mild and short recession in 2024, which will not have a major impact on the housing market," but cautioned that global conflicts could influence the severity of a recession.