Where Will the Housing Market Settle in 2024? 5 Experts Make Bold Prediction

Dawn Allcot
Michael Mincey / iStock.com
Michael Mincey / iStock.com

Mortgage rates began dropping steadily in the last months of 2023, down to 6.61% for a 30-year, fixed-rate loan in the last days of the year, according to data from Freddie Mac.

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But 85% of American homeowners remain locked into pre-pandemic mortgage rates of 5% and lower, making them hesitant to sell their home only to purchase another when both home prices and interest rates remain elevated.

Mortgage experts, however, predict that the market may shift in 2024, although not as dramatically as some would hope.

“Mortgage rates will fall to about 6.6% by the end of 2024. The gradual decline in rates combined with the small dip in prices will bring homebuyers some much-needed relief,” Redfin Chief Economist Daryl Fairweather told USA Today.

Jeff Taylor, founder and managing director at Mphasis Digital Risk, agreed that 30-year fixed rates will stay will in the “mid-6%” range.

National Association of Realtors chief economist Lawrence Yun made a bold prediction regarding the market. “A marked turn can be expected as mortgage rates have plunged in recent weeks,” he said.

However, even with interest rates falling, the lack of single-family homes on the market may keep prices elevated.

“While single-family housing starts have steadily increased throughout 2023, it will take years of accelerated new home construction to narrow the supply shortage gap from more than a decade of underbuilding,” Odeta Kushi, Deputy Chief Economist at First American, told USA Today.

Further, with existing homeowners refusing to sell because interest rates won’t match what they secured pre-pandemic, the housing shortage is destined to continue through 2024.

The rising costs of home insurance is also deterring new homebuyers, according to a recent Newsweek article. Real estate investors told the publication that it may be harder to get a mortgage in states like Florida, which is prone to extreme weather such as hurricanes, floods and tornadoes. If you can’t insure a home, you can’t secure a mortgage for its purchase. Current homeowners may experience rate hikes, too, but once a home is insured, it’s easier to maintain a policy than to write a new one.

California, Louisiana, Texas and Colorado also experienced rate hikes in 2023, as previously reported by GoBankingRates. Other states may be susceptible to future rate hikes, according to HUB Private Client research. These states include Minnesota, Missouri, Indiana and South Dakota, which is alarming as they were not previously considered areas at high-risk of weather-related claims.

But even with rising costs, 2024 could be the first year the U.S. sees an uptick in new home construction, as predicted by Robert Dietz, Chief Economist for the National Association of Home Builders.

“Due to low existing inventory, new construction has increased to approximately one-third of total single-family inventory in recent months when historically it was only 10% to 15%,” he said.

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After declines in 2022 and 2023, the increase in new construction could help alleviate some of the housing shortage. But even an increased inventory of new homes won’t make a significant difference in the housing market for 2024. “Home prices keep marching higher,” Yun told USA Today. “Only a dramatic rise in supply will dampen price appreciation.

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This article originally appeared on GOBankingRates.com: Where Will the Housing Market Settle in 2024? 5 Experts Make Bold Prediction

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