2024 Housing Market Predictions

Housing prices continue to climb despite sky-high mortgage rates

Experts in a recent Zillow Research survey believe the inventory of housing to return to pre-pandemic levels by the end of 2024.

• Despite soaring mortgage rates pushing down demand for homes, real estate prices are still sky-high.
• Home sales have started to decline however, with some sellers even lowering their asking price, leading some to suspect an impending housing market cool-off.

While there are plenty of signs that housing demand is declining, economists everywhere continue to theorize how long it will take to truly see home prices cool-off. Will the housing market ease in the next few years?

Many home-buying experts seem to think so. In a recent Zillowsurvey, the majority of panelists expect home prices to ease between now and 2024.

The primary issue plaguing the U.S. housing market is fundamentally supply and demand. Homes are simply not being built at a rate fast enough to match their sky-high demand. For context, the stockpile of available homes in the country is currently around two-months worth. In a normal housing environment, the U.S. typically has a five month or higher inventory of homes.

As such, despite the highest mortgage rates in 13 years, and rapidly falling demand for homes, the housing market has remained red hot. Some suspect that further rate hikes, possibly compounded by a recession will be enough to cool down prices. Others feel the housing market is likely to continue growing, but at a much slower rate.

The housing market is, in some sense still recovering from the Covid-19 pandemic. When the pandemic hit, both buyers and sellers were sent into a frenzy, largely due to record-low mortgage rates. Add in a general slow-down in home construction the past few years, has led to the currently shored-up state of the housing market.

When Will the Housing Market Cool-Off?

In the long-term, raising the supply of homes remains one of the only foolproof methods of lowering prices. In that regard, the future may be bright for would-be homebuyers.

According to Zillow Research, the supply of homes may not catch up to historical levels until around 2024. In a survey of housing experts, the majority believe home inventories will reach pre-pandemic levels by the end of 2024.

In the survey, experts were asked what year they expect to see inventory return to at least a monthly average of 1.5 million units. The most optimistic 4% answered 2022, and a further 37% answered 2023. The most frequent answer, from 38% of respondents, was 2024, meaning a cumulative 79% of respondents expect such a restoration of inventory sometime between now and the end of 2024.

It’s difficult to predict the future, especially amidst the rampant uncertainty present today. With that said, it’s clear that help is on the way for first-time home buyers, sooner or later.

By Shrey Dua, InvestorPlace

Cooling housing market – 25% of home listings cut asking price

Home sellers are slashing prices as the housing sector cools, according to a research from a real-estate data firm.

More than 25% of homes on the market right now have cut their price, Altos Research found, which is in stark contrast to how prices have been climbing over the last two years. 

“Rising rates and the shift in the economy has slowed down the super-eager buyers,” Mike Simonsen, co-founder and CEO of Altos Research, a real estate analytics firm, told MarketWatch. “And what we’re feeling is the speed of the shift.”

Put bluntly: “We’re shifting from a real buying frenzy to much more normal conditions,” he added.

Adding to the cooling off: On Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 0.75 percentage point, the biggest increase since 1994 as it tries to tame rising inflation from a 40-year high.

The U.S. housing market boom amid the pandemic was felt across the country. In a high-demand area like San Jose, California, the typical home was valued at $1.5 million, as of May 31, according to Zillow. That’s up 23.7% from the previous year. In May 2020, the typical home in the Bay Area was valued at $1.09 million.

Under normal conditions, about a third of homes listed on the market for sale take a price cut before they’re sold, Simonsen explained, and when the market is hot, that drops down to 25%. This spring, however, only 14% of homes on the market took a price cut. And that’s a reflection of high demand and low inventory.

“Sellers in the last two years can overprice their home and still get offers — that condition of the frenzy is gone, so it’s a much more normal market,” Simonsen said.

With buyers slowly backing off, that percentage is now climbing, a trend also supported by research from Redfin, a real-estate brokerage. Some 21% of sellers dropped their list price during the four weeks ending June 5, which was the second-highest share on record, going back to 2015, Redin said.

Sellers will need to lower their asking price by summer’s end. “By July, expect to be back to our normal conditions nationally,” Simonsen added. “We’ve been hotter than normal for over two full years since the start of the pandemic. By August, sellers who aren’t prepared will be surprised.”

Good news for first-time home buyers

The median sales price of a house sold in the U.S. was still at a record high of $428,700 in the first quarter of 2022, up from $313,000 in the first quarter of 2019 before the COVID-19 pandemic, according to data from the St. Louis Fed. Simonsen said the magnitude of price cuts could vary, from $5,000 upwards, depending on the value of the house.

For first-time house buyers, who have seen prices gradually rise out of their reach over the last two years, there could be some relief. “If people want to buy a home, they would get outbid by maybe somebody with all-cash, or an investor,” Simonsen said. “But now, selection is increasing, competition is decreasing, and they finally have some opportunities to buy.” 

But don’t expect prices to hit rock-bottom just yet. “There is nothing in the data yet that shows an indication of home prices crashing,” Simonsen said. But “there is an indication of probably zero home price appreciation in 2023.”

~Aarthi Swaminathan, Market Watch

Housing Market leveling off

The recent housing market is more balanced, as a new report shows a significant increase in active listings, a slowdown in sales and prices that are still rising, according to the latest report from the Northwest Multiple Listing Service.

The days of “multiple offers and waived inspections, at least in Pierce County, are behind us,” said Mike Larson, a member of the NWMLS board of directors.

Larson added that buyers are getting a little relief, but not much, as the market eases back into the pre-COVID-19 market.

Over 13,000 new listings were added to the NWMLS inventory during May, an increase of 9.7% year-over-year. It’s also the highest monthly number since June of 2021.

Snohomish and Douglas counties more than doubled their active listings from a year ago, with nearly a 135% increase for each county.

“The significant increase in the number of homes for sale has some speculating that the market is about to implode, but that is very unlikely,” said Matthew Gardner, chief economist at Windermere Real Estate. “What’s more likely to occur is that the additional supply will lead us toward a more balanced market, which after years of such lopsided conditions, is much needed.”

Gardner also believes that rising mortgage rates are not yet negatively impacting the housing market.

“The additional supply of homes for sale is giving buyers more choices, which is something they haven’t had in several years,” Gardner said.

Buyers should expect to pay more for homes and condos, although those increases may be leveling.

~Cox Media