Real Estate Market Predictions for 2024: When Will Home Prices Become Affordable Again?

The real estate market has been a hot topic of conversation for several years now. The pandemic, coupled with fluctuating mortgage rates and a tight housing inventory, has led to significant price increases across the U.S. As 2024 approaches, potential buyers and sellers are asking the million-dollar question: When will home prices become affordable again? Here, we break down the housing market predictions for 2024 and 2025, discuss the factors influencing home prices, and provide expert tips to navigate this competitive market.

The State of the Housing Market: A Cooling Period?

The housing market has yet to fully heat up this year, but changes are on the horizon. Mortgage rates, which have been on a roller-coaster ride, are stabilizing. According to recent data, mortgage rates are trending downward and have hit their lowest point in 15 months. This decline could be a game changer for buyers who have been waiting for better affordability.

Simultaneously, housing inventory is starting to loosen up, albeit slowly. Despite these positive trends, home prices continue to break records, leaving many prospective buyers hesitant to enter the market. The hope for further rate drops to improve affordability is common, but experts advise against waiting too long.

2024 Housing Market Forecast

In June 2023, U.S. home prices posted a 5.4% annual gain according to the S&P CoreLogic Case-Shiller Home Price Index. While this reflects a slowdown from May’s 5.9% annualized gain, it still surpassed previous records. Lisa Sturtevant, chief economist at Bright MLS, warns that the housing market is currently the most unaffordable it has ever been. Although Sturtevant predicts a decline in home prices in late 2024, she does not foresee any substantial price drops either in 2024 or 2025.

This means that despite a loosening inventory and downward trends in mortgage rates, buyers will continue to face a competitive market well into 2025. Zillow has reported that around 25% of its listings saw price reductions in June, but significant price drops remain unlikely in the near future.

Will There Be a Housing Market Recovery in 2025?

For the housing market to fully recover, several key factors must align. First, housing inventory needs to increase significantly to ease the pressure on home prices. Second, mortgage rates must continue their descent, but experts caution that rates should not fall too quickly. A rapid decline could lead to a surge in demand, depleting inventory and causing prices to bounce back up.

Keith Gumbinger, vice president at HSH.com, suggests that returning mortgage rates to the 4-5% range could help stabilize the market, but this may take time. Additionally, factors such as the Federal Reserve’s actions regarding the federal funds rate will have a significant impact on mortgage rates and, by extension, the housing market.

Although 2025 may bring some improvements in affordability, experts like Gumbinger and Sturtevant agree that it will likely not be a game-changing year. Affordability will improve slightly, but buyers should be prepared for a competitive market well into the next few years.

National Association of Realtors (NAR) Practice Changes: What Buyers and Sellers Should Know

One of the most significant developments in real estate this year is the National Association of Realtors (NAR) agreeing to a $418 million settlement in response to antitrust lawsuits filed on behalf of home sellers. This settlement introduces new rules aimed at creating a more transparent home-buying process.

Starting in August 2023, several key changes have been implemented that affect both buyers and sellers:

- For Buyers: Buyers must now enter into a written agreement with their agent before touring homes. They can also negotiate commission rates and must specify the compensation their agent will receive.
- For Sellers: Sellers can negotiate commissions with their listing broker and are no longer required to offer broker compensation through the MLS. However, they can offer buyer concessions to make their homes more appealing, as long as those concessions are unrelated to the buyer’s representative compensation.

These changes will likely create a more flexible environment for both buyers and sellers, but the impact on home affordability remains to be seen.

Housing Inventory Forecast: When Will Prices Come Down?

Despite recent improvements, the housing market still faces a significant inventory shortage. Many homeowners are “locked in” to their ultra-low mortgage rates and are reluctant to sell in the current high-priced market. This is one of the key reasons why housing supply remains low and why prices continue to rise. According to Freddie Mac, the inventory deficit will persist for some time, likely well into 2024.

New home construction has helped to alleviate the shortage, but not enough to make a meaningful difference. While inventory levels have risen to their highest point since 2020, we are still 33% below pre-pandemic levels. For a meaningful decrease in home prices, mortgage rates will need to fall to the low 5% range, which many experts do not expect to happen until at least 2025.

Residential Real Estate Trends: Existing and New Home Sales

Existing-home sales have shown some improvement, rising by 1.3% in July 2023, according to the National Association of Realtors (NAR). However, the median home price has also increased, now sitting at $422,600. While this signals a slow recovery, affordability remains a key challenge for many buyers.

New home sales have also rebounded, with sales rising by 10.6% compared to June. However, the median price for new homes continues to exceed that of existing homes, making affordability a concern for those looking to purchase newly constructed properties.

Will the Housing Market Crash in 2024?

With home prices continuing to rise, some are concerned about a potential housing market crash. However, most experts agree that a crash is unlikely. The current housing market is supported by record-low inventory levels, and today’s homeowners are in a much stronger financial position compared to the 2008 financial crisis. Many homeowners have significant equity in their homes, which protects against a rapid drop in prices.

Is 2024 or 2025 the Best Time to Buy a Home?

Ultimately, the decision to buy a home is personal and depends on your financial situation. While 2025 may offer some improvements in affordability, waiting for the “perfect” time to buy is a risky strategy. Mortgage rates may decline, but pent-up demand could result in increased competition, driving home prices higher.

Experts recommend buying when you find a home that fits your budget and meets your needs, rather than waiting for better market conditions. Buyers today have more time to evaluate their options, and sellers are cutting prices more frequently, creating opportunities for those ready to buy.  The best time to buy a home is when the time is right for you.

Contact South Florida's Best Realtors

If you're ready to take the next step in today's competitive real estate market, whether you're looking to buy, sell, invest, or rent, our expert team at The Pearl Antonacci Group is here to guide you every step of the way. With our deep knowledge of the local market and years of proven success, we can help you make informed decisions and achieve your real estate goals. Don't navigate this challenging market alone—contact the top real estate agents at The Pearl Antonacci Group today for personalized, professional assistance tailored to your needs. We're here to help you succeed!

Housing Market Frequently Asked Questions

Will declining mortgage rates cause home prices to rise?

Declining mortgage rates could increase demand, which in turn may cause home prices to rise. A sudden drop in rates could lead to a surge in buyers, reducing inventory and driving prices higher.

What will happen if the housing market crashes?

While real estate experts believe a housing market crash is unlikely in 2024, if it were to happen, home prices would drop rapidly, and demand would significantly decrease. However, the current low inventory levels act as a safeguard against such a scenario.

Is it smart to buy real estate before a recession?

Buying real estate before a recession can be a smart decision if you are financially prepared and have found a home that fits your needs. Recessions can sometimes lead to lower interest rates, but waiting for perfect market conditions can be risky.

Waterfront homes in South Florida

Get In Touch Today

Provide a valid email address.

Posted by Brian Pearl on

Tags

Email Send a link to post via Email

Leave A Comment

e.g. yourwebsitename.com
Please note that your email address is kept private upon posting.