What Will the Housing Market Look Like in Summer 2024?
Key Takeaways
A shortage of homes for sale will continue, creating a seller's market but limiting options for buyers.
Expect fewer home inspections and other protections offered in contracts as buyers compete for scarce properties.
Persistently high mortgage rates (around 7%) will limit the number of qualified buyers.
Demand for rentals is expected to stay high, with potential rent increases but likely not reaching 2022 peak levels.
Joint purchasing agreements and "house hacking" (renting out part of your home) may be used by some buyers to afford homeownership.
Any real estate agent around the nation looks forward to the period between late spring and early summer, as the market traditionally heats up.
The weather is nicer, days are longer, and more people who work 40 or more hours a week have more daylight hours to view potential homes. Statistics show that late April through June are the busiest months on the real estate calendar each year.
However, things are shaping up to be a bit different in summer 2024. The real estate housing market has been in a perilous state over the last couple of years, and it seems unlikely that things will change drastically over the next few months.
Is it a good time to buy a home or to sell one?
Whether you’re looking to buy or sell a home in the coming months, it’s important to know what the market is doing, both locally and nationally.
Inventory Will Be Low
One of the greatest threats to the real estate industry is the inventory shortage that is impacting the entire nation. The term “housing inventory” refers to how many months it would take for every home for sale on the market to be purchased.
When the market is operating at its best, there are usually so many homes on the market that it would take between five and six months for them to all receive an accepted offer.
Currently, there are so few homes on the market that the National Association of Realtors (NAR) reports that it would only take three months to purchase them all, roughly half of where the market should be.
This is unlikely to change anytime soon, and depending on which side of the transaction you’re on, this is either good news or bad.
If you’re selling a home, you certainly have more control over the transaction. Consider this principle on a smaller level.
If you live in a neighborhood where there are 20 homes and 15 of them are on the market, you’re competing with 14 other sellers in your search for a qualified buyer.
However, if only three of those homes are listed for sale, you suddenly have 1/3 of the market, giving you even more leverage when it comes time to negotiate.
If you’re in the market to purchase a home, this lack of inventory is troubling at best. Consider that same neighborhood that has 20 homes.
If you’re looking for one of those 15 homes for sale to purchase, there’s a good chance that you’re going to get a reasonable deal on a property, even if you’re competing with nine other people.
However, if you’re one of 10 people wanting to purchase a home for sale and there are only three to choose from, you’re going to have to be willing to pay more or offer some concessions along the way.
Speaking of Concessions
According to countless buyer’s agents across the country, contingencies in purchase agreements are becoming less and less common.
Contingencies are tools found in a contract that protect the buyer. For instance, you can put a contingency in a purchase offer that says that your offer is only valid if the home passes an inspection from a licensed home inspector.
Should the home fail the inspection, the buyer is allowed to walk away from the deal without any sort of financial penalty. Since buyers have less leverage when they’re negotiating a purchase, they’re starting to take some of the conditions that are typically in place out of the contract.
This has led to fewer home inspections and other aspects of the transaction that have long been standard. If you’re insistent on purchasing a home in this market, you may need to be willing to forgoe this step.
What’s Going on With Mortgage Rates?
Whether you’ve gone through the process of applying for a mortgage or you’re just starting to look for homes, you’ve probably encountered interest rates of 7% or higher.
While this is down from the 20-year high of 8% that mortgage applicants encountered in 2023, it’s still much higher than normal.
To further complicate matters, the Federal Reserve, the government entity that sets interest rates decided not to lower interest rates in 2024.
It’s believed that this decision is tied to the Federal Reserve’s decision to drop interest rates drastically during the COVID-19 pandemic in an effort to encourage people to borrow money, stabilizing the economy.
However, the decision has serious implications for both buyers and sellers in the summer of 2024.
When interest rates go up, it’s harder to get approved for a mortgage, disqualifying countless applicants before they can even get into the market.
Typically, interest rates hover around 5%, and with rates a full two points higher, monthly mortgage payments increase, resulting in fewer qualified buyers. This is also bad news for sellers, especially those who are motivated to sell their homes in a hurry.
When there aren’t enough qualified buyers in the real estate housing market, sellers must choose between holding onto their property until they receive an acceptable offer and selling their home for much less than they want to.
That’s an unlikely decision, as most home sellers need to make enough money from the sale of one home to pay off their outstanding mortgage and have enough left over to use as a down payment on their next house.
While interest rates aren’t expected to significantly rise in 2024, they’re not going to drop.
What About Rentals?
Over the last couple of years, landlords have reaped the greatest benefits in the chaotic housing market. The increase in interest rates led to a lot of buyers putting off their search for a home, but they still needed shelter, resulting in a two-year increase in rentals.
Experts agree that the demand for rental properties is unlikely to decrease.
In fact, while interest rates continue to run high, it’s possible that the demand for rental properties will outpace the supply, creating a severe logjam in the rental market.
A surprising trend surrounding the increase in rental properties is that prices have actually come down since they reached their highest point in February of 2022.
Typically, when there are more people looking to rent properties, landlords increase rent prices to match the growing demand.
However, more and more people are getting into the rental market as landlords, resulting in a decrease in monthly rent payments. If the demand actually outpaces the supply in the summer of 2024, it’s expected that rents will go up, but it’s safe to assume that they won’t be as high as they were a couple of years ago.
Joint Purchasing Agreements
In recent years, people buying homes have started taking unorthodox approaches to make their dreams of homeownership a reality. This includes joint purchases.
Traditionally, couples bought homes, either before marriage or shortly thereafter. However, due to rising costs, people have started getting creative with their mortgage applications, pooling their resources, and purchasing homes with friends and family members.
While it certainly makes it easier to afford monthly payments, it’s important to understand the potential legal ramifications of owning a home with other people. Everyone on the mortgage is responsible for the payments, so this approach should be taken carefully.
Additionally, many young homeowners are taking part in something called “house hacking.” According to Zillow, house hacking refers to homeowners renting out a portion of their home to a third party.
Depending on the amount charged, the rent can be used to cover most or even all of the monthly mortgage payments.
The uncertainty of the real estate market is unlikely to change much in the summer of 2024. However, there is still space for people to buy and sell properties.
Whether you’re buying or selling in summer 2024, it’s a good idea to work with a real estate agent who understands your local market and the ongoing trends in the industry.