The new year could finally bring good tidings for homebuyers — or at least the beginning of improved housing affordability.
Historically high mortgage rates and housing prices that stymied homebuyers this year are expected to ebb a bit in 2024, according to real estate brokerage Realtor.com’s housing market forecast. While home shoppers shouldn’t expect major relief from today’s crushing homeownership costs, small gains in affordability are expected to help some buyers get a foot in the door.
Renters can also look forward to somewhat better conditions as new construction hits the market in the coming months.
What will the housing market look like in 2024?
The year 2023 was a rough one for homebuyers thanks to stubbornly high prices and rising interest rates, which kept many current homeowners locked into their current mortgages. Soaring home insurance costs throughout 2023 also worsened the outlook for buyers, many of whom were forced to hold back on making a purchase or back out of deals.
Now that inflation is easing, mortgage rates are expected to decline throughout 2024. But the wheels of progress turn slowly: Realtor.com experts are forecasting that rates will be 6.8% on average for 2024 and 6.5% by the year’s end. (For comparison, the average mortgage rate between 2013 and 2019 was about 4%, and they reached a high of 7.79% earlier this year.)
As for home prices, Realtor.com expects the typical monthly purchase cost for the median priced home listing to drop slightly from this year’s $2,240 to $2,200, amounting to about 35% of the average U.S. household income. Demand will probably remain low, and inventory will still be limited as would-be sellers hold back.
“Moves of necessity — for job changes, family situation changes, and downsizing to a more affordable market — are likely to drive home sales in 2024,” Danielle Hale, Realtor.com’s chief economist, said in the report.
On the whole, while Realtor.com expects record-high unaffordability to wane, Americans shouldn’t anticipate a return to pre-inflation, pre-pandemic norms in 2024. And if inflation ticks back up, home sales could suffer even more, upending any prospective market stabilization.
There is, however, something of a silver lining for renters in 2024: An increase in new construction is expected to hit the market and give renters more options. That said, the fact that renting will still be more affordable than buying will also mean more competition for rentals. Realtor.com doesn’t expect rent prices to budge much — the median rent price for 2024 is forecasted to decrease only about .2% below this year’s.
What can help homebuyers in 2024?
Though affordability will still be a challenge for the foreseeable future, free tools like a mortgage payment calculator can help prospective buyers figure out the best options for their needs in terms of loans, down payment and home price. Exploring different loan products with mortgage lenders may also help buyers find lower rates or less stringent loan requirements.
Although the average down payment reached a record high of $30,000 this year, there are an estimated 2,000-plus down payment assistance (or DPA) programs available throughout the country. DPA programs can be especially beneficial for first-time buyers and are typically designed to meet the needs of local homebuyers.
Homebuyers can start by researching DPAs in their desired state, county and city and reaching out to providers about their qualification requirements. Working with a housing counselor, which every lender has available, can help buyers explore the programs that best suit them.