Forecasting 2024: When Will the Housing Market Become Buyer-Friendly?

Current State of the Real Estate Market

The volatility of mortgage rates seems to have settled. Recently, rates have been more stable, gently decreasing with some brief periods of flatness, and are now at their lowest in 15 months. Meanwhile, inventory levels are easing, which is slowing the pace of home price increases.

Even with these positive trends, home prices are still reaching new highs. Many buyers are probably holding out for further rate reductions to enhance affordability. However, experts advise against delaying too long. The average home value in the U.S. has reached $362,481, reflecting a 3.3% increase year-over-year, according to Zillow. Recently, average 30-year mortgage rates dropped to 6.05%, a decrease of 40 basis points from the previous month.

First-time homebuyers, in particular, have faced difficulties, as they typically possess less buying power and benefit most from lower mortgage rates and stable prices. However, there are signs of improvement, as affordability is gradually increasing with the decline in mortgage rates, which are expected to continue falling.

Anticipated Trends in the 2024 Housing Market

Mortgage rates are anticipated to decline this year, which is expected to enhance affordability for borrowers. However, this drop in rates is likely to stimulate increased demand for homes, which may keep home prices elevated and potentially drive them even higher. As a result, finding a home within your budget could become increasingly challenging. Prospective buyers might find themselves making multiple offers on various properties before securing an accepted bid.

This situation is compounded by the fact that inventory remains low, creating a competitive market environment. With more buyers entering the market due to lower rates, bidding wars could become more common, further pushing up prices. First-time homebuyers, who typically have less purchasing power, may find it particularly difficult to navigate this landscape.

Experts predict that mortgage rates could end the year between 6.4% and 6.7%, which, while lower than recent highs, still poses challenges for affordability. As the market adjusts, buyers should be prepared for a potentially lengthy search process and consider strategies to strengthen their offers in a competitive market.

Will There Ever Be a Right Time to Buy a Home?

Many potential homebuyers are feeling discouraged and have resigned themselves to renting due to the current housing market’s challenges. While home prices are significantly higher than in the past, opportunities still exist for individuals to become homeowners, particularly through various first-time homebuyer mortgages and down payment assistance programs that have emerged in recent years.

Today, it is possible to secure a mortgage with as little as 1% down, utilizing assistance for down payments and closing costs to reduce the cash needed for purchasing a home. Although home prices are unlikely to see substantial declines, mortgage rates are expected to decrease. Lower mortgage rates enhance borrowing capacity, allowing buyers to afford more, even as prices rise.

As builders gradually increase housing supply, price appreciation may stabilize, and buyer competition could diminish over time. However, it may take several years before the effects of increased supply are fully realized. Therefore, while the path to homeownership may be challenging, it is still attainable with the right resources and support.