It’s that time of year again where we try to gain some clarity on what the coming year will bring for the housing market. Without a crystal ball, it’s impossible to say with 100% certainty what 2024 has in store for our industry, but we can look to the analysts who run these numbers day in and day out to see what they predict.
First, to understand where we’re currently at, you need some insight on how the last couple of years have progressed. According to the Zillow Home Value Index, the price of a typical US home increased 40% between January 2020 and August 2022. A “typical home” is calculated as the average cost of homes within the 35th to 65th percentiles. These skyrocketing prices also came at a time when interest rates were unprecedentedly low— Freddie Mac data shows that the 30-year mortgage rate was around 3% at the end of 2021. So despite booming prices, buyers maintained high borrowing power which created a whirlwind of competition.
Home prices continued to grow in 2023, but at a much slower rate than the years prior. The median existing-home price in November 2023 had a 4% YoY gain. Inventory remained low but spiking interest rates had cut back some of the competition. The average 30-year mortgage rate in 2023 was 6.81%— more than double 2021’s average rate of 2.96%.
where are we now?
As 2023 rounded out, the median existing-home price was $382,600. The average mortgage rate last week was 6.69%. Realtor.com data showed an uptick in new listings in December— something that hasn’t happened during this time of year since 2020. Many homeowners have been reluctant to make a move and give up their low interest rates. As rates have settled into the 6s after peaking in the fall, more homeowners are coming off the fence and preparing to sell.
Another satisfying find from Realtor.com is their list of the Top 10 Real Estate Markets of 2024 that declared Toledo as the #1 pick. They predict a home sales price change of 8.3% in the area this year.
Danielle Hale, Realtor.com Chief Economist, explained, “It’s less prone to the wild swings we’ve seen in other markets. The highs weren’t as high and the lows weren’t as low—so that’s one of the reasons they’re going to start to recover first.”
where are we headed?
Fannie Mae’s Home Price Expectation Survey predicts home prices will continue to rise for the next 5 years with a 2.35% increase in 2024. The National Association of Realtors projects the annual median home price to jump 1.4% in 2024 with a 13% increase in existing-home sales.
Zillow’s Home Value and Home Sales Forecast originally predicted that home values would remain flat through the year, but it was revised last week with a 3.7% rise in home values. The company explained, “The revision was driven by external factors – such as the decline in mortgage rates towards the end of the year and an improved inflation outlook from the Federal Reserve.”
Zillow economist Nicole Bachaud also added that the new appreciation estimates are on par with normal pre-pandemic increases. “Since 2020, the housing market experienced far wider ranges of home price growth and declines. By moving to an expected 3.7% in the year ahead, appreciation is more in line with the market’s historical norms,” Bachaud said.
As values grow at a more predictable rate, buyers can expect mortgage rates to remain within historical norms, as well. Every decade before the 2010s began with interest rates over 5%.
Lawrence Yun, chief economist at the National Association of Realtors, told CNBC that 3% interest rates won’t be making a comeback anytime soon. “One can never truly predict the future, but I don’t see mortgage rates returning back to the 3% range in the remainder of my lifetime,” Yun said.
The 30-year fixed rate mortgage will average 7% in Q1 2024 and slowly decline over the year, landing at a Q4 average of 6.5%, according to the Fannie Mae Housing Forecast.
Jeff Taylor, founder and managing director at Mphasis Digital Risk, also notes that there will be some election year volatility that will cause rates to jump around. However, he predicts 30-year fixed rates will hover in the mid 6% range on average.
All in all, we’re looking forward to a return to normalcy in the coming year. Homeowners will continue to benefit from appreciation, albeit much more gradual, and buyers will get a slight reprieve from the market madness of prior years. If you take away only one thing from these predictions, let it be this: don’t try to time the market. That rarely works for even the savviest of investors.
Bill Banfield, EVP of Capital Markets for Rocket Mortgage, affirms, “It is impossible to time the market, but people will always need to buy homes— whether they are downsizing after children go off to college or they relocate for a new job.” Life circumstances don’t care whether it’s the best time to buy. What matters most is that you educate yourself on current market conditions and find an experienced Realtor to help you accomplish your goals.
may you have a prosperous 2024!