Mortgage relief is on the horizon for U.S. homebuyers as a strong economy bolsters the housing market, according to the Realtor.com 2024 Forecast Update. The report predicts a year-end rise in both for-sale inventory and the median sales price of existing homes, projecting increases of 14.5% and 4.6%, respectively, despite ongoing challenges from elevated mortgage rates.
Easing mortgage rates offer hope
The forecast brings welcome news for prospective homebuyers, with mortgage rates beginning to decline. After hitting their lowest point since May 2023 earlier this month, rates are expected to continue falling as the Federal Reserve potentially relaxes its tight monetary policy, thanks to improving inflation trends. The year-end mortgage rate is now forecasted at 6.3%, down from an earlier estimate of 6.5%, while the average yearly rate is revised to 6.7%.
“Homebuyers have a fair amount to look forward to in the latter part of the year,” said Danielle Hale, Chief Economist at Realtor.com. “Mortgage rates have finally begun to ease, and this trend is expected to continue, boosting homebuyer purchasing power.”
Housing inventory on the rise
Inventory shortages, a significant hurdle for the housing market in recent years, appear to be easing. The forecast anticipates a 14.5% increase in for-sale inventory by the end of the year, a substantial revision from the initial prediction of a 14% decrease. This shift is partly due to homeowners who, encouraged by favorable mortgage rates at the start of 2024, have opted to sell their homes rather than wait.
Additionally, sellers are increasingly willing to keep their homes on the market longer, rather than delisting, contributing to the higher inventory levels. As a result, buyers may find themselves with more negotiating power than in recent years.
Home prices continue upward trend
Despite rising inventory and high mortgage rates, home prices are still climbing. The latest 2024 Realtor.com Housing Forecast Update report revises its earlier forecast of a 1.7% decline in home prices to a 4.6% increase, reflecting the resilience of the U.S. economy and an ongoing undersupply of homes. Even with more homes on the market, the nation’s largest housing markets remain competitive, with only 12 of the 50 largest markets returning to or exceeding their pre-pandemic inventory levels.
Sales outlook and market wildcards
Home sales are expected to see only a modest increase, with an anticipated 4.1 million sales by year-end, up just 0.08% year-over-year. High mortgage rates during the peak buying season this spring have dampened sales, and while the arrival of lower rates is likely to attract buyers back to the market, the overall pace is expected to remain sluggish.
Two major events could also influence the market in the coming months: the impact of the National Association of Realtors (NAR) commission settlements and the upcoming presidential election. While the effects of the NAR settlements remain uncertain, the election is not expected to significantly disrupt the housing market, as both major candidates have previous White House experience.
Stable rental market
In the rental sector, conditions have remained relatively stable. A balance between rising multifamily completions, which have boosted supply, and strong demand has kept rental prices steady. For many, renting continues to be a more favorable option than buying, as the cost scales remain tipped in favor of renting.
As 2024 progresses, the housing market is poised for modest gains, with easing mortgage rates offering a glimmer of hope for buyers. However, challenges remain, and the landscape will continue to evolve as economic conditions and market dynamics shift.
Key updated predictions
- Mortgage rates: Average 6.7% throughout the year, 6.3% by end of year. 2023’s rates average 6.8%, 6.6% at end of year.
- Existing home median sales price appreciation: +4.6 by December. In 2023 the rate was +1.1%.
- Existing home sales: +0.8% to 4.1 million by end-of-year. Last year was -18.7% to 4.09 million.
- Single-family home housing starts: +10.5% (1.0 million) expected in 2024. This is up from the 0.9 million in 2023.
- Homeownership rate: 65.5 % by end of 2024. Down from 65.9% in 2023.
