What Will the Housing Market Look Like in 2024?

The past few years have been a seller's market when it comes to buying a house. As of September 2023, the average price for a home in the U.S. sat at $394,300, which is 2.8% higher than last year, according to National Association of Realtors (NAR) data. Not only were price tags continuing to grow, but mortgage rates along with them. As of early November 2023, the average 30-year mortgage rate was 7.69%.

These rates have made it extremely difficult and frustrating for people trying to buy a house, and experts think it may not get any better going into 2024.

So, what are the housing market predictions for 2024?

The Pandemic and Low Housing Inventory

One of the main reasons prices and mortgage rates have skyrocketed to historic levels in the past few years is due to low inventory. Throughout 2023, housing inventory has been very low, with just 1.13 million existing homes for sale on the market. This is over 8% lower than last year.

So, why exactly is housing inventory so low?

The simple answer is supply and demand. The supply of houses for sale isn't nearly enough to reach the demand, which is causing an increase in pricing. Although the COVID-19 pandemic was over 3 years ago, it is still negatively impacting the housing inventory through increasing material costs, supply chain issues, and labor shortages.

Investors and Low Housing Inventory

Another factor that is affecting the housing shortage is real estate investment. According to the NAR, institutional investors were responsible for just over 13% of the properties sold in 2021. Typically, institutional investors are big companies trying to turn an investment into profit. They could buy 100 or more houses in one area, making it even more difficult to buy if you live there.

These investors buy the houses and rent them out, only contributing to the low housing inventory. What may even be more frustrating for buyers is that these investors bought the homes for 26% lower than the state average prices during that time.

Investors can also get a bulk deal on inexpensive houses, which may be good for business but bad for individual homebuyers. To add salt to the wound, big companies will typically buy in cash and as-is, making it a more appealing offer for sellers.

Looking Ahead to the 2024 Housing Market

While we'd love to give you some good news, experts suggest that the 2024 housing market will likely only get worse.

NAR chief economist, Lawrence Yun predicts that home prices will rise 3 to 4% in the upcoming year. Meaning, 2024 will likely continue to be a seller's market, and that probably won't be changing anytime soon.

However, there are a few factors that could contribute to a more manageable housing market. The first being another mortgage rate increase. While this may sound like a downfall, it may not totally be. If mortgage rates continue to rise, that could lead to less people looking to buy homes. The lower demand for houses could lower the prices and could end up being a blessing in disguise.

The second factor is a scary word - recession. Many people may be struggling financially right now, but we're not technically in a recession. The technical definition of a recession is a period when the gross domestic product falls for two consecutive quarters. The same logic applies here as it does to higher mortgage rates. A recession could mean a lower demand of houses and could lead to lower prices.

The third factor is as simple as what goes up must come down. Markets are fluctuating, but they're also cyclical. Experts don't expect the market to come down in 2024, but it's not completely out of the question.