Key takeaways

  • Low levels of inventory mean that sellers continue to have the upper hand in the housing market.
  • Mortgage rates have come down from their peak but are still high, and steep home prices are dissuading would-be buyers.
  • If rates were to drop further, that would spur the market for both buyers and sellers.

With home prices historically high and inventory still very tight, many prospective sellers and hopeful buyers are feeling nervous about today’s housing market.

The median sale price for an existing home in the U.S. was $382,600 as of December 2023, the sixth straight month of year-over-year price increases. And after rising above 8 percent in October, the average 30-year mortgage rate as of the end of January 2024 was 6.84 percent — still higher than most homeowners’ locked-in rates, but a welcome reprieve from the recent 20-year highs.

Home prices, mortgage rates and inventory levels will all shape housing affordability in the coming year. Curious where these trends may go? Read on to learn what the experts predict for the 2024 housing market.

What will happen to the housing market in 2024?

Rates roughly doubled in 2022, thanks in part to the Federal Reserve’s war on inflation, and have stayed relatively high since. While the Fed does not directly set mortgage rates, mortgage lenders take cues from them, and mortgage rates climbed in tandem with the Fed’s long string of rate hikes.

Mortgage rates should trend lower throughout the year as inflation pressures ease and the Fed begins to cut short-term interest rates. — Greg McBride, Bankrate Chief Financial Analyst

The Fed held rates steady again in its first meeting of 2024, and even signaled that rate cuts, rather than hikes, could be coming in the near future. But many predict that homebuyers will still be feeling the squeeze throughout the year. “Mortgage rates should trend lower throughout the year as inflation pressures ease and the Fed begins to cut short-term interest rates, but rates may not dip below 6 percent until late in the year,” says Greg McBride, CFA, chief financial analyst for Bankrate. “A sharp economic slowdown would bring mortgage rates materially lower than that — but be careful what you wish for.”

Mortgage
Key housing market stats
  • The median home-sale price as of December 2023 was $382,600, up 4.4 percent from one year ago, according to NAR data.
  • The nation had a 3.2-month supply of housing inventory as of December, per NAR, which is low enough to be considered a seller’s market.
  • Home-price growth dropped slightly in November 2023 — by 0.2 percent — ending nine consecutive months of increases, according to S&P CoreLogic’s latest Case-Shiller Index.
  • Bankrate’s latest national survey of large lenders shows the average rate on a 30-year mortgage was 6.84 percent as of January 31, 2024.
  • The U.S. inflation rate as of December 2023 was 3.4 percent — still higher than the Fed’s stated goal of 2 percent.

Will housing sales decline?

While home prices more than held firm in 2023, the volume of home sales softened considerably. Existing-home sales declined for five months in a row before rising slightly in November 2023. However, they fell again in December to an annual pace of 3.78 million, according to NAR data, which represents a 6.2 percent drop year-over-year. However, these trends may pivot in 2024 if mortgage rates continue to dip.

“The housing market is off to a good start this year, as consumers benefit from falling mortgage rates,” said NAR chief economist Lawrence Yun in the association’s December pending home sales report. NAR forecasts that sales will rise by 13 percent in 2024.

“Housing sales are expected to increase a bit from this year,” agrees Chen Zhao, who leads the economics team at Redfin. “However,” she qualifies, “we are not expecting sales to increase dramatically, as rates are likely to remain above 6 percent.”

“Lower mortgage rates would help spur home sales activity, which are expected to increase in 2024 compared to 2023,” says Selma Hepp, chief economist at CoreLogic. “Declines in mortgage rates will drive more sellers to trade their existing home and help add much-needed inventory to the market, leading to more transactions.”

Will housing inventory increase?

Speaking of much-needed inventory, housing supply remained very low throughout 2023. The overall number of existing homes on the market for sale as of December sat at 1 million units, up slightly from the year before but down 11.5 percent from November’s figure. That represents only a 3.2-month supply, far short of the 5 to 6 months usually needed for a balanced market.

There are simply not enough homes for sale. — Lawrence Yun, Chief Economist, National Association of Realtors

“There are simply not enough homes for sale,” Yun said in a statement earlier this year. “The market can easily absorb a doubling of inventory.”

For inventory levels to improve significantly, there would need to be either a surge of homeowners listing their existing properties or a huge amount of new-construction homes hitting the market. While both seem relatively unlikely, Yun does foresee some increase in housing inventory for 2024. “There will be more home construction, and more existing homeowners will be willing to sell and give up their low mortgage rates,” he says.

Will home prices go down?

Housing prices have been on fire lately, culminating in historic highs — December’s median of $382,600 was only about $30K short of the highest monthly home price NAR has ever recorded ($413,800, set in June 2022).

So will home prices drop in 2024? Probably not, Yun said in December: “Home price appreciation can only moderate from drastically improved supply. Another 30 percent rise in home construction can easily be absorbed in the marketplace.” In the pending home sales report, NAR predicted median home prices to rise 1.4 percent to to $395,100 in 2024, and then another 2.6 percent to $405,200 in 2025.

Zhao also noted that prices are intricately connected with housing inventory. “Sellers are likely to remain reluctant to give up their low interest rate for a much higher one, so inventory will remain constrained,” she says. “As more time passes, more homeowners may be ‘forced’ to sell due to life events, so inventory may rise from the current anemic levels, but it’s unlikely to increase much. That means that prices are unlikely to fall on a year-over-year basis, unless demand falters.”

Will 2024 be a buyer’s or seller’s market?

In today’s market, tight inventory continues to give sellers the upper hand. There are more buyers than there are homes available, so each home that comes on the market becomes more of a hot commodity than it might if there were more options to choose from. Without a significant uptick in inventory, the seller’s market seems unlikely to change this year.

“The current significant shortage of inventory suggests it would be hard to [become] a buyer’s market anytime soon,” says Hepp.

“Given expectations about interest rates and supply, demand will probably exceed supply similar to current conditions,” Zhao says. “Supply is likely to remain below what we would deem a balanced market.”

Buyers should be wary of biting off more than can be financially chewed. — Greg McBride, Bankrate Chief Financial Analyst

“The plague of low inventory won’t be cured in the short-term, but a retreat in mortgage rates could prompt a few more sellers to put their homes on the market,” says McBride. “There are still more buyers than sellers in many markets, but there will be better balance this year than last. Buyers should be wary of biting off more than can be financially chewed. Home prices are at record highs in most markets, and insurance costs are up substantially in many coastal areas. You’re not getting a bargain, and the willingness to walk away might prove to be a good choice.”

Bottom line on the 2024 housing market

The combination of high mortgage rates, steep home prices and low inventory levels are lining up to make the 2024 housing market a challenging one for both buyers and sellers. But rates have been cooling a bit — if that continues throughout the year, as some experts predict, then market activity should heat up in response.

The complexities of the current conditions mean that, now more than ever, it’s smart to lean on the guidance of an experienced local real estate agent. If you want to enter the market in 2024, whether as a buyer or a seller, let a pro lead the way for you.

FAQs

  • Maybe, but probably not significantly. Experts predict that higher rates will likely persist in 2024 — though hopefully, after surpassing 8 percent in October 2023, the worst is behind us. “I believe we’ve already reached the peak in terms of interest rates,” NAR chief economist Lawrence Yun said at the company’s NXT conference in mid-November. He told the audience he expects rates to range between 6 and 7 percent by spring buying season, and that prediction is already beginning to play out: As of January 31, Bankrate data showed the 30-year mortgage rate was averaging 6.84 percent.
  • No — experts do not think there is a housing market crash looming in 2024. Lending standards are much more strict now than they were before the Great Recession, and with low inventory and high demand both continuing, the housing market is not likely to enter a recession in the coming year.
  • Many prospective homebuyers chose to wait things out in 2023, in the hopes that 2024 would bring a more advantageous market. But so far, with mortgage interest rates still relatively high and housing inventory stubbornly low, it looks like 2024 will remain a challenging time to buy a house. If rates continue to go down, though, that would alter the landscape — not only would it make the purchase more affordable for buyers, but homeowners locked into their previous lower rates might finally choose to sell, which would add much-needed inventory to the market.