U.S. Housing Market Forecast for 2024: Low Inventory, Steady Price Growth

In this report: A collection of U.S. housing market predictions and forecasts for 2024, from HBI’s analysts as well as curated third-party sources.

The real estate market has been on quite a roller coaster ride over the past three years or so. You probably know most of this story already, so let’s just start with a quick recap.

The Three Major Shifts of the Past Few Years

While the housing market is constantly changing, the most noteworthy trends of the past few years can be grouped into three distinct stages:

Shift #1, Mid-2020 — The market was already gaining momentum in 2019. But shortly after the COVID pandemic spread to the United States, things shifted into overdrive. The pandemic led to a nationwide surge in home-buying activity, which depleted inventory levels and sent home prices skyrocketing.

Shift #2, Mid-2022 — But during the second half of 2022, the market began to cool considerably. Rising mortgage rates had a lot to do with this. The average rate for a 30-year fixed mortgage loan rose from 3.1% at the end of 2021 to more than 7% by October 2022. This and other factors caused home buyers to hit the pause button, leading to a cooling trend that affected nearly all housing markets across the U.S.

Shift #3, Early-2023 — The mortgage rate surge mentioned above had an unexpected impact on real estate inventory levels. Suddenly, a lot of homeowners who had previously considered selling were reluctant to give up their super-low mortgage rates. (A person who bought a home four years ago might have a mortgage rate in the low-3% range, compared to the current average of nearly 7%.) This mindset has limited the number of new homes coming on the market, increasing competition among buyers.

Real estate market predictions for 2024 have been heavily influenced by the third shift mentioned above. Since the beginning of 2023, inventory levels have declined in many housing markets across the U.S. This has led to faster home sales while putting upward pressure on home prices.

So it seems that the nationwide real estate “cooldown” phase is nearing its end. As we move further into the second half of 2023, we could see increased competition among home buyers along with an upturn in prices nationwide.

Now that we’re caught up to the present, let’s take a look at the possible future. Here’s the general outlook and forecast for the U.S. housing market stretching into 2024.

Housing Market Predictions for 2024

The nationwide downturn in home prices will likely come to an end over the coming months, followed by a more moderate increase in house values going forward.

This trend will eventually reach most cities across the country. Markets that have experienced a more significant downturn (like Austin, Texas) might take longer to reach the “rebound” stage. But they’ll get there eventually.

Inventory shortages will continue to be an issue in 2024. The supply gains that occurred during 2022 were greatly diminished during “shift #3” mentioned above. New home construction could ease the crunch, but probably not enough to make a huge difference. In most housing markets across the U.S., home buyers will continue to grapple with tight inventory conditions.

So that’s the gist of it. Now, let’s take a closer look at these and other real estate market predictions for 2024:

1. Home prices will rise more than they did in 2023.

The chart below shows the median home value in the U.S. going back five years or so, according to Zillow. A couple of things will jump out at you right away.

Home prices through June 2023

First of all, you can see where the home-price appreciation line grew steeper going into the second half of 2022. This was the “COVID effect,” a well-documented trend that resulted in a surge in home-buying activity nationwide.

As a result of that trend, inventory levels plummeted in housing markets across the country, while home prices rose at an unprecedented pace. (And by unprecedented, I mean more than 20% growth within a single year in some cities, which was shocking at the time.)

But things have changed considerably since then. Notice how the trend line flattened and even dipped slightly during the second half of 2022. By the summer of 2023, home prices in most housing markets across the U.S. were either leveling off or dropping.

That’s to be expected. The rapid price growth of the past few years was unsustainable. A market correction or “reset” was all but inevitable, and that’s exactly what we are seeing right now in the second half of 2023.

In July, Zillow also offered a U.S. housing market forecast relating to home prices. They reported that prices were up by 1.2% for the past year, and predicted they would rise by around 6.3% over the next 12 months. Specifically, this forecast covers the 12-month period from June 2023 to June 2024.

2. Nearly all markets will experience price growth next year.

On a month-to-month basis, we’re already seeing a turnaround in many real estate markets across the U.S., with prices beginning to climb again. Additionally, the latest sales figures show that there’s still plenty of demand among home buyers nationwide.

The most likely housing market forecast for 2024 is that prices will begin rising again in most U.S. cities, but at a slower pace more that reflects historical norms. Many markets could reach this “rebound” point later this year, while those that experienced a more significant downturn might not get there until early 2024.

As of right now, however, it’s still a mixed bag. House values are still dropping in many parts of the country. Other markets are beginning to level off, while some are currently seeing an uptick in local home prices. Real estate conditions vary widely from one region to the next.

Our prediction is that, by the first quarter of 2024, the majority of U.S. housing markets will be experiencing some degree of price growth. Supply conditions have a lot to do with this forecast for the U.S. real estate market. So let’s move on to that subject…

3. Low supply levels will continue to challenge buyers.

For the past few years, tight supply conditions have challenged home buyers all across the U.S., forcing them to square off in overheated bidding wars and multiple-offer scenarios.

Housing market supply had been trending downward for years, long before the pandemic. COVID just made it worse, by prompting a nationwide migratory shift and a sharp rise in home-buying activity.

Supply chart 2013 to 2023

The above chart shows the average “months of supply” for the U.S. real estate market as a whole. Months of supply (MOS) measures the balance between supply and demand in the housing market. This theoretical metric is calculated by dividing the number of homes for sale by the number sold each month, assuming no new properties come onto the market.

A low MOS means there are not enough homes for sale to meet the demand of buyers. This can lead to bidding wars and higher prices. A high MOS means there are more homes for sale than there are buyers. This can give buyers more negotiating power and lead to lower prices.

Once again, you can see the “COVID effect” in this chart. Notice how real estate supply levels dropped sharply in 2020 and bottomed out by the end of 2021.

You can also see how supply rose throughout 2022, before starting to fall again at the start of this year. It is this most recent trend that’s driving real estate market forecasts for 2024.

On the far right side of the chart, you can see how supply levels have declined steadily since the start of 2023. This will likely increase demand among buyers nationwide, while putting upward pressure on home prices well into 2024.

Granted, there has been an increase in new home construction in many cities across the U.S. But it probably won’t be enough to make a big dent in the ongoing supply shortage. According to Doug Duncan, Senior Vice President and Chief Economist, Fannie Mae:

“Homebuilders continue to add to that supply, but years of meager homebuilding over the past business cycle means the imbalance will likely continue for some time.”

Higher mortgage rates have contributed to the recent decline in supply. According to a Realtor.com survey conducted earlier this year:

“More than three-quarters of sellers feel ‘locked in’ to their current home due to a low mortgage rate. More than half of sellers surveyed plan to wait until rates come down before selling, while 25% plan to sell soon for personal reasons, despite feeling locked in.”

A housing market forecast report issued by Fannie Mae last month did a good job summarizing all of these interconnected trends:

“Current housing market dynamics continue to be fueled by the lack of existing homes available for sale, a trend that did not improve during the spring homebuying season, when more homes are typically put on the market. This has supported a return to home price growth in recent months…”

4. Mortgage rates will hover in the mid- to upper-6% range.

In the previous section, we looked at how higher mortgage rates have made some homeowners reluctant to sell their homes. The Realtor.com survey mentioned that a lot of would-be home sellers are waiting for mortgage rates to drop, before listing their properties for sale.

The problem is, mortgage rates aren’t expected to decline significantly anytime soon. In fact, a recent housing market forecast issued by Freddie Mac made the prediction that rates would hover within their current range for the foreseeable future.

Mortgage rates as of July 2023
Chart: Average 30-year mortgage rates over the past three years (Freddie Mac)

In their most recent “Economic, Housing and Mortgage Market Outlook,” issued last month, the research team from Freddie Mac said they expect “mortgage rates to move mostly sideways, most likely remaining above 6% through year-end.”

If the current status quo continues (as predicted), it could limit the number of homes coming onto the market over the coming months, carrying the current supply shortage into 2024. This is partly why some U.S. real estate market forecasts and predictions point to rising prices ahead.

There are still plenty of buyers in the market, but not enough homes to go around.

Now doesn’t that sound familiar.

Disclaimer: This report includes housing market predictions and projections extending into 2024. Such forward-looking views are the equivalent of an educated guess and should be treated as such. The Home Buying Institute makes no claims about future economic or real estate conditions.

Brandon Cornett

Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author

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