Dan Seiffert SVP, Accounting | realtors.com
So far, 2024 has been a challenging year for the housing market with high mortgage rates, stubborn home prices, and sluggish sales. However, conditions might be improving.
The next six months are expected to bring some relief to homebuyers and sellers in the form of lower mortgage rates, according to the Realtor.com® midyear housing forecast for 2024.
Rates for a 30-year fixed home loan have already decreased to 6.47% for the week ending Aug. 8, according to Freddie Mac. This is the lowest they have been in over a year.
They could fall even further, with Realtor.com economists predicting a rate of 6.3% by the end of 2024.
“Economic signals suggest that the Fed should begin cutting its federal funds rate in 2024,” says Realtor.com Chief Economist Danielle Hale. This decrease is “long-awaited mortgage rate relief.”
While many other real estate predictions hinge on just how low rates go, here’s how the Realtor.com economist team predicts the housing market will unfold in the next six months, with hopeful news for both homebuyers and sellers.
Mortgage rates will finally fall
The Federal Reserve has kept its benchmark borrowing rates high for years in an effort to tame inflation but has signaled a rate cut could be coming next month.
Recent data, including July’s jobs report, showed rising unemployment. This provides “evidence that Fed policy is working—perhaps working overtime—and a rate cut, even a large one, may be appropriate,” says Hale.
While mortgage rates don’t follow Fed rates exactly, they tend to move in the same direction. Any cuts to Fed rates should eventually help mortgage rates tumble too.
“Although the Fed has not yet lowered rates this year, we expect it to do so beginning in September,” adds Hale. “We are going to see Fed rate cuts before the end of 2024, and they’re going to be bigger than we expected at the outset of the year.”
Home prices will remain sticky
One point of frustration for homebuyers struggling with high mortgage rates is that home prices have remained high this year too.
“Despite elevated mortgage rates, rising inventory, and homes sitting on the market longer, prices continue to rise,” explains Hale.
As a result, the Realtor.com economics team expects prices to rise by 4.6% by the end of the year.
“Sales prices have continued higher with June being a new record high for median existing-home sales price,” says Hale.
The mortgage ‘lock-in’ effect will ease
Over the past six months, homes for sale have risen “more than anticipated,” says Hale who anticipates a 14.5% gain in housing stock for the year.
“We have seen substantial improvement in inventory in the first half of 2024, climbing by more than 35% on a year-over-year basis,” she says.
The uptick can be traced to several factors: Buyers facing affordability headwinds sat out of the market while housing stock swelled. Meanwhile, sellers—many bound by low interest rates—also came off sidelines when rates fell earlier this year.
“The lock-in effect is likely still holding back many sellers but we expect this number to shrink as time passes,” says Hale.
However, housing stock remains below pre-pandemic levels. Out of 50 largest markets Realtor.com tracks only twelve have returned or exceeded their pre-pandemic inventory levels.
Home sales will remain sluggish
Spring’s usually busy homebuying season was slowed by high mortgage rates with June existing-home sales dropping to 3.89 million—the lowest in six months.
Yet when rates fall more sellers are expected list their homes.
“Home sales for 2024 are expected see modest increase from original forecast of .8%, totaling four point one million—a figure marking second-lowest annual total since two thousand twelve” says Hale
But as rates subside she adds “This should facilitate more home sales and normal sales pace slower than overheated market seen past few years”
While sellers “still edge” it has “dulled past few years higher rates”
Rents will hold steady
One sector free from ebb flow mortgage-rates rental-market which remained stable twenty-twenty-four
“The tug-of-war between rising multifamily completions boosting rental supply elevated rental demand resulted nationwide stalemate” explains Hale
“We see demand new households continuing renters who might like buy-home find today’s rent versus buy scales tipped too far favor renting but rental supply kept up builders work through backlog multifamily units under construction”
Bottom line where rents fall all comes down local level While many metros seeing new rental highs cost renting home markets such Austin TX Las Vegas more ten percent below recent peaks
Hale adds San Francisco only metro among fifty largest markets tracked by Realtor com where rents back twenty-nineteen levels
The presidential election and housing policy
With housing affordability near crisis levels questions abound whether presidential election Nov five could help ease pain Good news both presidential candidates say committed making housing affordable
“Housing affordability top concern voters both candidates recognize need improve housing affordability” says Hale “That said I don’t expect dominate campaign because there just isn’t enough distance between two parties issue”
Harris prioritizing affordable-housing Trump focusing deregulation both could help increase housing supply (Michael Ciaglo; Justin Sullivan/Getty Images)
Both candidates Kamala Harris Donald Trump previously served White House making economic policies predictable
Housing policies both parties emphasize shift from demand-focused strategies supply-focused efforts aimed boosting new-housing construction While approaches differ slightly Harris prioritizing affordable-housing Trump focusing deregulation both could help increase-housing-supply
“We don’t expect wild card election-year wild economy or housing-market twenty-twenty-four” says Hale “But looming political battle over tax-policy changes twenty-twenty-five create volatility further down road”
The NAR settlement
National Association Realtors® settlement slated take effect Aug seventeen expected impact real-estate industry particularly regarding commissions house-prices
“Our take depend macro conditions much industry consumer adaptations any adjustments likely happen gradually over time” says Hale
In past home-sellers often paid commission then split between listing agent buyer’s agent
“Put another way today’s sellers may ‘writing check’ agents out sale proceeds but home-prices likely higher result” says Hale
After Aug seventeen buyers may responsible compensating own agent If norm changes home-prices could adjust reflect shift buyer-agent compensation present wild-card house-prices not just through end twenty-twenty-four into twenty-twenty-five well” says Hale
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