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Housing Market Forecast USA: Will House Prices Go Down in 2024

Some experts says that  the house price will go down in 2024. Let’s have a detailed analysis of what our view point is.

In 2023, the aspirations of many prospective home buyers were dampened by a challenging landscape. Mortgage rates surged to a daunting high of 7.79%, and during the third quarter, median home prices surpassed $400,000. 

Adding to the strain, July witnessed average monthly payments reaching an all-time high at $2,306, as reported by Intercontinental Exchange, a financial technology and data services provider.

Nevertheless, the horizon for 2024 appears to offer a more favorable outlook for certain homebuyers. While home prices are anticipated to maintain elevated levels and potentially rise in select markets, industry experts predict a softening of prices in specific regions across the country.

Optimism resonates among economists, particularly regarding the Federal Reserve’s stance. After maintaining the federal funds rate unchanged for a second consecutive meeting on November 1, and with signs of inflation decelerating in October, experts anticipate the conclusion of the central bank’s 20-month-long rate-hiking campaign.

The federal funds rate, a benchmark influencing overnight loans among financial institutions, indirectly affects mortgage rates.

Despite these positive developments, challenges to affordability are expected to persist into 2024. Pent-up demand coupled with low inventory levels are projected to bolster prices.

Additionally, elevated mortgage rates are likely to endure until the Federal Reserve implements cuts to the federal funds rate, presenting a continued hurdle for prospective home buyers.

  • As of September 2023, the median home-sale price reached $394,300, reflecting a 2.8 percent increase from the previous year, according to data from the National Association of Realtors (NAR).
  • In terms of housing inventory, the nation boasted a scant 3.4-month supply as of September, a condition categorized as a seller’s market by the NAR, underscoring the prevailing scarcity of available homes.
  • Tracking home-price growth, August 2023 witnessed a 2.6 percent increase, marking the seventh consecutive month of escalation, as reported by S&P CoreLogic’s Case-Shiller Index.
  • Turning attention to mortgage rates, Bankrate’s latest national survey of major lenders reveals that, as of November 8, 2023, the average rate on a 30-year mortgage stands at 7.69 percent, underscoring the financial landscape for homebuyers.
  • Finally, the U.S. inflation rate, measured in October 2023, reached 3.2 percent — a figure slightly surpassing the Federal Reserve’s stated goal of 2 percent, shedding light on the economic context within which the housing market operates.

Housing Inventory Forecast for 2024

USA housing market yearly

In the current housing landscape, numerous homeowners find themselves “locked in” at historically low interest rates or reluctant to sell due to soaring home prices. This situation perpetuates a scenario where demand consistently outstrips housing supply, and this trend is expected to persist for the foreseeable future.

Rick Sharga, the founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm, anticipates that a substantial increase in the supply of existing homes for sale is unlikely until mortgage rates retreat to the low 5% range, a prospect not foreseen until 2024.

The scarcity of housing stock, particularly in the entry-level segment, remains a persistent issue, buoying demand and sustaining exceptionally high home prices.

Despite a dip in builder sentiment indicated by the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which fell from 40 in October to 34 in November, new single-family building permits continued to rise slightly in October—the ninth consecutive monthly increase, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

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

Existing-home sales, however, experienced a sharp decline due to a combination of high rates and low inventory. After a 2.7% increase in September, sales plummeted by 4.1% in October, with year-over-year transactions dropping nearly 15%.

The median existing-home sales price reached $391,800, marking a 3.4% increase from the previous year and setting a record for October. With existing homes sitting at a meager 3.6-month supply, well below the four to six months considered balanced, the market faces challenges.

Potential homebuyers face a grim scenario with prices up by 40% compared to February 2020, according to Zillow. The latest Fannie Mae Home Purchase Sentiment Index (HPSI) reported a survey-record 85% of consumers stating they need to postpone home-buying plans, driven by persistently high mortgage rates and steep home prices.

Monthly mortgage payments have reached an all-time high of $2,866, a significant increase from $2,395 a year earlier, further deterring first-time buyers.

Despite concerns over affordability and pessimism reflected in various indices, experts downplay the likelihood of house price go down in 2024 or there is a housing market crash in 2024. 

Homeowners, buoyed by positive home equity, stand on a more secure footing than those after the 2008 financial crisis.

Orphe Divounguy, a senior macroeconomist at Zillow Home Loans, anticipates a moderation in home appreciation, emphasizing factors such as Millennials entering prime home-buying years, wage growth, and sustained housing demand.

 While the prospect of a price collapse remains within the realm of possibility, especially in investor-heavy markets, experts underscore the overall resilience of the housing market in the face of challenges.

Will housing sales decline?

As of October 2023,  the median home price in the United States was $745,847, including existing homes, new construction homes, single-family homes, condos and townhomes.

 However, experts mainly refer to the median price, with a more representative number being $425,000 in October 2023.

 The visual representation shown in the image compares the average home price in March 2022 of $405,000 to the average home price in October 2023  of $425,000.

 It is important to note that the median price is strategically placed between the lowest and highest prices, providing a more sophisticated view than the average.

 This preference arises from the potential bias caused by a selected number of homes with unusually high or low prices, thereby distorting the average and misrepresenting the true cost of a typical home.

 This nuance must always be taken into account when monitoring changes in  average house prices in 2024.

 A basic understanding of real estate markets requires the recognition that real estate prices are closely related to the interaction of inventory and demand.

A closer look at these components provides information about the expected developments in 2024.

Housing Inventory

Housing Stock Scarcity plays an important role when it comes to housing stock, defined as the number of homes for sale. Low availability encourages buyers to offer higher prices and gives sellers more bargaining power.

As a result, lower inventory levels are correlated with higher house prices, a trend that has been accentuated by the recent rise in house prices.

His 2024 forecast of shows that housing inventory will remain limited. The total housing stock in October 2023 recorded a slight increase of 5.

1% compared to the previous month, but was still 2. 3% lower than the same period last year. Despite continued construction efforts, the pace of new construction in October 2023 decreased by 13.

8% year-to-date, which is a limiting factor in the growth of total housing stock.

Buyer Demand

Buyer Demand Uncertainty looms in 2024 when we focus on buyer demand, a key factor contributing to real estate price trends.

The development of buyer demand will depend on  actions  the Federal Reserve may take, particularly with respect to federal interest rates indicates that buyer demand currently exceeds housing supply and real estate prices are expected to remain relatively stable in 2024.

Although some markets may experience some volatility, the overall outlook indicates that current price trends will continue.

This delicate balance between supply and demand highlights the delicate state of the real estate market, and navigating the market requires careful monitoring of economic indicators and political changes.

Is it worth buying a home at this time, or should you wait until house prices recover?

To decide whether now is a good time to enter the real estate market, Careful consideration should be given beyond general market conditions.

Financial preparation plays an important role, and even if inventory is limited and interest rates are high, it’s a good time to buy a home if you’re financially prepared.

 

Conversely, if financial reserves are lacking, the oversupply of inventory and low interest rates make it a bad time to buy.

What does the 2024 housing market mean for buyers and sellers?

Is it a buyer's market?

Analyzing the 2024 real estate market provides insight into trends for both buyers and sellers.

A buyer’s market traditionally means there is an oversupply of housing for potential buyers, but the continued low  supply of housing means that such a situation may materialize in the near future suggests that it is low.

Is it a seller's market?

On the contrary, the seller’s market paradigm, where demand exceeds housing supply, remains dominant.

A quick transaction at or near the asking price is likely for sellers of a home who are willing to sell it quickly.

Realistic pricing based on market conditions is essential to success in this scenario.

Emotional attachments and personal experiences can influence valuations, but for accurate representation it is essential to hire a knowledgeable agent to evaluate and establish a fair market value .

In summary, the decision to buy or sell in the current real estate market goes beyond the traditional buyer-seller market classification.

Financial preparedness has emerged as the most important factor, highlighting the need for potential buyers and sellers alike to assess their readiness before making important real estate decisions.

Is this time Worth for buying house or we should wait for Recovery of house rates?

Deciding whether now is an opportune time to enter the real estate market involves careful consideration beyond the prevailing market conditions.

Financial preparedness plays a pivotal role, rendering it a favorable time to buy a home even amidst limited inventory and elevated interest rates, provided one is financially equipped.

 

Conversely, if financial readiness is lacking, an abundance of inventory and lowered interest rates doesn’t deem it a suitable time for a purchase.

Will There Be a Lot of Foreclosures in 2024?

yearly trend in USA house market

Foreclosure rates are expected to trend upward  in 2024, reflecting trends observed last year.

For context, the number of foreclosures in October 2023 increased by 6% year over year.

However, allaying concerns that the Great Recession will lead to another alarming rise in foreclosures in 2010 provides an encouraging outlook.

Notably, while the number of foreclosures in 2022 increased by 67% compared to 2021, the number is still significantly lower, house price will go down in 2024 by 70% compared to 2019, which was the peak for foreclosures in 2010.

 

Compared to 2015, it was an astonishing 96%.

Trends Matter The number of  foreclosures today is much different than during the Great Recession.

Many of the homes currently in foreclosure are unlikely to be foreclosed on by lenders.

This may be due to the fact that a significant number of borrowers in foreclosure currently have positive equity and the value of their home exceeds the outstanding balance on their mortgage.

Therefore, by selling their home, these homeowners can take advantage of positive equity and avoid foreclosure.

The implications of these foreclosure trends are distinct for both homeowners and prospective buyers:

Home Owners:  The reassuring news is that the housing market is not poised for an inundation of foreclosures. As a result, the value of their homes is not anticipated to depreciate abruptly due to a sudden surge in home inventory.

Home Buyers: On the flip side, for potential homebuyers awaiting opportune deals on foreclosed properties, managing expectations is crucial. Unlike the conditions during the Great Recession, the current market environment does not present similar opportunities for significant discounts on foreclosed homes.

Moreover, it’s essential for buyers to conduct thorough research on any foreclosed property, recognizing that such purchases may come with their own set of potential challenges.

Prudent due diligence ensures that buyers are well-informed about the property and fully aware of any potential complications before making a purchase decision.

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