Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again?
What many had hoped would be a rosy spring home-buying season has turned into a thorny challenge for home shoppers already demoralized by a challenging market.
Home sale activity was stagnant last month as mortgage rates and home prices maintained an upward trajectory. One silver lining is that more resale inventory entered the market, which should help rein in home price growth, at least to some extent.
Even so, experts say the market will only see momentum return once mortgage rates drop low enough to make homes more affordable and incentivize homeowners locked in at cheap rates to move.
Housing Market Forecast for 2024
Experts insist the housing market will improve.
Unfortunately, hopeful buyers continue to see a delay in this transformation, thanks partly to inflation, which is taking its sweet time cooling off, further delaying the Federal Reserve from cutting the federal funds rate.
Mortgage rates indirectly track this benchmark interest rate that banks use as a guide for overnight lending. Consequently, with the federal funds rate at its highest level in over two decades and the first of three anticipated rate cuts seemingly deferred, mortgage rates—and borrowers—are feeling the impact.
However, one rate cut could lead to mortgage rates easing enough to improve housing market conditions. For example, a drop in mortgage rates from 6.8% to 6% could significantly increase a buyer’s purchasing power, according to a recent Realtor.com and National Association of Realtors (NAR) study. But experts don’t expect such a drop to happen any time soon.
“With mortgage rates remaining around 7%, significant improvements are unlikely in the short term,” said Jiayi Xu, economist at Realtor.com, in an emailed statement.
Meanwhile, U.S. home prices remain unaffected by persistently high mortgage rates, posting an annual 6.5% gain in March—the ninth consecutive month of year-over-year increases and a new all-time March high—according to the latest S&P CoreLogic Case-Shiller Home Price Index. The Index has hit new highs in six of the past 12 months.
All that said, some good news is poking through this spring—resale inventory is starting to emerge in certain regions, which should help slow the pace of home price growth.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off, but the timeline for that development seems to be getting more protracted with rates lingering around 7%. The 30-year fixed mortgage rate slightly dipped to 6.95% the week ending June 13, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
NAR Settlement Rocks the Residential Real Estate Industry
Following years of litigation, the NAR has agreed to pay $418 million to settle a series of high-profile antitrust lawsuits filed in 2019 on behalf of home sellers. A federal judge granted preliminary approval for the settlement in April.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though a final approval hearing is not scheduled until November, required practice changes laid out in the agreement will go into effect beginning August 17, according to a NAR press release.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings.
Moreover, sellers will no longer be responsible for paying buyer broker commissions—upending an accepted practice that has been in place for years—and real estate agents participating in the MLS must establish written representation agreements with buyers.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
If you sold a home in the past ten years, you may be eligible for a small piece of this settlement pie. Visit realestatecommissionlitigation.com for more information about filing a claim.
How Will the New Rules Impact the Buying and Selling Process?
Per NAR’s settlement terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
NAR Changes Will Impact These Home Buyers Most
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Both Gibbs and Gorkowski note that veterans and active duty service members taking out VA loans face a unique challenge under the new rules. The Department of Veterans Affairs policy prohibits VA buyers from paying broker commissions, meaning they must be negotiated with sellers.
However, this issue may be resolved—at least for now.
After NAR and other industry stakeholders pushed the VA to revise its policy, the VA signaled it would temporarily lift its buyer agent payment ban. This temporary change may help prevent many veteran home shoppers from going without representation.
Gibbs and Gorkowski are also among the many agents who are especially concerned about first-time home buyers. After July, first-time buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
Housing Inventory Forecast for 2024
Despite more resale homes entering the market, the inventory shortage remains severe and likely will for some time, thanks to multiple headwinds.
For one, many homeowners remain “locked in” at ultra-low mortgage rates, unwilling to exchange for a higher rate in a high-priced housing market. Consequently, demand continues to outpace housing supply—and likely will for a while.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
New home construction has provided some relief, but not enough to fill the inventory gap meaningfully.
Entry-level home supply is particularly dire, contributing to an ongoing cycle of propped-up demand and inflated prices.
Here’s what the latest home values look like around the country.
SOURCE FORBES : READ More @ Forbes