As we begin another year, everyone wants to know: “Where is the housing market headed in 2024?”
It’s not only buyers, sellers, and homeowners who are impacted. The real estate market plays an integral role in the overall U.S. economy. The past year has been brutal on the housing market. Buyer’s cannot afford to buy, sellers are staying put, 20-year high mortgage rates and extremely low inventory. It’s like the housing market is frozen solid. But will it change?
AFFORDABILITY
Affordability is expected to improve. Although 2023 brought us some of the worst affordability circumstances since the early ’80s economists don’t anticipate it getting worse.
“We’re not going to see a major breakthrough in the logjam that has been the housing market over the last year or so, but 2024 will be a baby step in the right direction,” says Realtor.com Chief Economist Danielle Hale. “It’s going to stop getting worse.”1
What does it mean for you? If you’re in the market to buy a home, you may be faced with having to provide a larger down payment or looking into closing assistance programs. Many of the counties in Maryland and Virginia offer programs to help buyers (see Maryland Special Programs). If you’re a current homeowner, real estate has proven once again to be a solid investment over the long term. In fact, the equity level of American homeowners is still higher than it was when the market bottomed out back in 2007.
WILL THE MARKET STABILIZE?
It is expected we will have a challenging but stable market. Realtor.com annual forecast predicts home prices will remain high and mortgage rates will not retreat very much and move-in ready homes in desirable areas will remain scarce. But these factors will vary by location especially in the Maryland, D.C. and Virginia area.
“Everybody’s ready for the stalemate in housing to be over,” says Hale. “But the pieces aren’t in place for that to happen just yet.”1
What does it mean for you? Market stabilization is good. This could lead to mortgage rates becoming a bit better or the Fed not raising rates for a bit.
HOME PRICES ARE EXPECTED TO FALL
Home prices are expected to drop but only by about 1.75% according to Realtor.com. This decline might not give buyers the incentive or financial relief they need or want but it won’t keep them up at night worried about increasing prices.
This slight decrease also gives wages a chance to improve. Home prices should hit pause.
“It will be a bit of a break after what have been pretty relentless home price increases,” says Hale. “It’s going to be a big leap forward for buyers’ mental health. Some of the pressure and sense of urgency will start to let up.”1
This drop will not be significant enough for existing homeowners to begin to loose equity in their homes2. With the major price gains over the past decade, most homeowners could sell their homes today and not be underwater like they were during the Great Recession.
What does it mean for you? A bit of relief from the seemingly constant rise in home prices. Feels more like a bit of a market correction happening this year. But remember real estate is local and this might not affect Maryland, D.C. and Virginia in the same way it will other areas around the nation.
MORTGAGE RATES WILL COME DOWN A BIT
Economists don’t foresee mortgage rates coming back down to the lows we had during the pandemic. Realtor.com economists anticipate rates will average about 6.8% this year falling to about 6.5% by year end. But small changes can drive big changes in your monthly mortgage payments. But rates are unlikely to fall enough to give the housing market a kick in the pants that it needs.
What does it mean for you? Buyers who are making a national median income in 2024 can expect to spend 34.9% of their earnings on housing payments dropping to 30% by year end. This is a better number than October 2023 when it was 39%. Homeowners are still remaining stationary unmotivated by the market performance keeping inventory low.
HOUSING SHORTAGE WORSE
The largest problem for homebuyers this year is finding homes to buy. Homeowners are more likely to stay put if they can’t find something they want to downsize or upsize into. The number of existing homes for sale is expected to fall by 14% this year (which includes new construction.) High mortgage rates are enticing existing homeowners to stay put. Most existing homeowners have mortgage rates that are below the current average today. If they go to sell and buy again, they will be forced into a much higher rate. Any market activity happening today is the result of family situation changes or relocation. However, builders are expected to keep building new homes. New construction is anticipated to up tick by 0.4% over last year and they are likely to continue to offer buying incentives to close deals.
HOME SALE NUMBERS REMAIN LOW
It is expected that since homeowners are staying in their homes and buyers are having a hard time finding affordable rates and homes that sales will remain low. This will be a drastic turnaround from the market of the pandemic.
RENT PRICES SHOULD GET A BIT CHEAPER
Large price hikes in rents are expected to end. With mortgages high and inventory low some anticipated buyers may have been forced to remain renters for a longer period. Builders ramped up apartment construction over the past year adding a bit more competition for renters in the market. This addition of rental spaces has taken some burden off the rental prices.
WE’RE HERE TO GUIDE YOU
While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of the Maryland or Virginia market and the local issues that are likely to drive home values in these particular neighborhoods.
If you’re considering buying or selling a home in 2024, contact us now to schedule a FREE consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.
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