How Is the Housing Market Right Now? 2024 Trends to Watch

Inventory will rebound, but housing shortage will persist

In December 2023, the inventory of unsold existing homes totaled 1 million units, down 11.5% from November but up 4.2% compared to the same period in 2022. Heading into 2024, NAR’s chief economist expects housing inventory to jump 30% “as more sellers begin to list after delaying selling over the past two years.”

Even a marked increase in inventory isn’t enough to offset the nationwide housing shortage, currently estimated at 3.2 million homes. This will tip the market in favor of sellers and keep home prices elevated throughout 2024.

In a recent interview with Realtor Magazine, Freddie Mac’s chief economist, Sam Khater, noted, “Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace.”

Home sales will begin to recover

After a dismal 2023, which saw the slowest rate of existing-home sales in nearly three decades, things are looking up. Yun predicts a 13.5% increase in existing-home sales for 2024, and BrightMLS forecasts a 12.1% rise. “[December 2023] sales look to be the bottom before inevitably turning higher in the new year,” says Yun.

Single-family housing construction will pick up

In most markets, new construction single-family homes cost more than existing homes. Typically, during times of high interest rates, new homes become less affordable, and buyer demand tapers off. Due to the current market’s tight inventory, however, sales of new single-family homes are bouncing back. According to the US Census Bureau, new single-family home sales rose 8% from November to December and increased 4.4% compared to the same period in 2022, totaling 664,000 annualized units. “Single-family starts are expected to grow in 2024, adding much-needed inventory to the market,” says Alicia Huey, chairman of the National Association of Home Builders (NAHB).

Baby Boomers will keep all-cash deals alive

Twenty percent of home buyers paid cash for their home in 2023, according to NAR’s 2023 Profile of Home Buyers and Sellers. Baby Boomers, currently the largest generation of home buyers, are far more likely to forego financing. More than 50% of Older Boomers (aged 68–76) paid all cash when purchasing a home last year, and 32% of Younger Boomers (aged 58–67) paid for theirs without a mortgage. All-cash deals have risen in popularity since 2021. At that time, the housing market was incredibly competitive and a cash offer was considered more appealing to sellers. Today, home buyers are leveraging cash to avoid paying high interest rates.

What factors will influence the 2024 housing market?

The housing market will continue to benefit sellers in 2024, but there will be some fluctuation caused by:

• Inflation: The Federal Reserve aims for 2% inflation per year, and it’s inching closer to that benchmark, sitting at 3.4% as of December 2023 with a 0.3% increase from the previous month. When inflation is high, the Fed raises interest rates to get it under control, causing mortgage rates to go up in tandem. In 2024, the Fed is expected to take a delicate approach to cutting interest rates to avoid another inflation spike. This could keep mortgage rates in the 6.1%–6.6% range throughout the year, although additional rate cuts are expected in 2025.
• Labor market: Freddie Mac predicts job growth will moderate in 2024, which could lessen the demand for housing. In December, unemployment held steady at 3.7% but was 0.3% higher than the same period one year prior. Wage growth is cooling and continues to be outpaced by home prices. According to U.S. Bank, “Wage growth slowed from the levels of the previous three years, ending 2023 with a 4.1% growth rate.” A softer labor market could lead to less activity in the housing market in 2024.
• Millennial demand: More than half of Millennials now own homes, but for those who have yet to get a foot on the property ladder, the barriers to homeownership continue to mount. However, Millennial demand is expected to persist in 2024 as sidelined first-time home buyers jump back into the market and current homeowners upsize to accommodate lifestyle changes like having children or taking care of an aging relative.

How fast will homes sell in 2024?

According to the latest observations from the St. Louis Fed, properties spent a median of 61 days on market (DOM) in December 2023. This period is a decrease from the 72 days recorded in January 2023 but an increase from the 43 days in May 2023.

Historically, as DOM goes up, home prices go down. Inversely, when DOM goes down, home prices typically go up. However, this pattern doesn’t fully apply to the current real estate market.

During the pandemic homebuying boom, home values increased significantly and they’ve remained elevated ever since. Data from the National Association of Realtors (NAR) highlights this trend: the median sales price of an existing-home reached $382,600 in December 2023, a 4.4% increase compared to the same period a year earlier. This rise marks the sixth straight month of year-over-year price growth.

We predict homes will sell faster once mortgage rates decrease and draw more buyers back into the market. However, due to extremely limited inventory, it remains a seller’s market where buyers will likely face competition for available homes.

Projections for home sales growth are moderate, with an expected increase of only 12.1% to 13.5% over the historically low total of 2023. BrightMLS points out that its forecast of 4.6 million home sales for 2024 is “still below the number of home sales in a typical year.”

What does all this mean for home sellers?

Here are a few ways home sellers could benefit from our 2024 housing market predictions (if all goes to plan, of course):

Low inventory

When listings are far and few between, sellers have the upper hand. In December 2023, there were 3.2 months of supply, indicating the time it would take to sell all current listings at the existing rate of sales. For context, a balanced market has 5–7 months of supply. Homeowners can benefit from low inventory when selling their homes but may face challenges when they go to purchase a new home.

Agents surveyed in HomeLight’s most recent quarterly report caution that sellers should price their homes accurately, be willing to negotiate or make concessions, and put effort into staging and cleaning to prevent buyers from walking away from the negotiating table.

“Many sellers still believe that the market is popping like it did prior to the interest rate rise,” says Becky Partin, a top real estate agent in Savannah, Georgia. “Buyers now have time to think and have options. Even though inventory is low, you still have to make your home as marketable as it can be.”

Falling mortgage rates

High mortgage rates kept prospective homebuyers on the sidelines in 2023, while homeowners with ultra-low, pandemic-era mortgage rates stayed put, resulting in a situation housing experts refer to as the “lock-in effect.” This situation is expected to change in 2024 as mortgage rates slowly descend. The Federal Reserve is projected to lower interest rates three times throughout the year, potentially starting in late spring.

High home values

If you’re looking to leverage your current home’s equity to buy a new one, there’s a good chance you’ve built up a considerable amount since the pandemic housing boom. According to a recent HomeLight survey, 49% of repeat buyers use equity from their current home to purchase a new one.

During the third quarter of 2023, the average homeowner in the US saw an increase of about $20,000 in home equity over the previous year, according to CoreLogic. The largest average national equity gains occurred in Hawaii, California, and Massachusetts. Because inventory remains so tight, home values are not expected to fall anytime soon.

What does all this mean for homebuyers?

Many prospective buyers who sat out the 2023 housing market are eager to return. The market is expected to be somewhat better for homebuyers in 2024 thanks to falling mortgage rates, rising inventory, and stabilizing home prices. That said, affordability will still be a major concern, especially for first-time homebuyers. To get a better deal, it may be beneficial to consider the following strategies:

Compromising on some wants

You may not get the exact home size, amenities, or upgrades that you want, especially as inventory remains painfully low. Seventy-five percent of HomeLight agents surveyed in our latest report say they are encouraging buyers to consider properties that need minor upgrades. Working with a top-performing real estate agent can also increase the likelihood of your offer being accepted. Use HomeLight’s agent matching service to get referred to two or three top agents in your area who best suit your home buying needs.

Broadening your search area

This works incredibly well if you can work remotely. If you consider alternate locations and neighborhoods, you may find an affordable home more successfully.

Exploring first-time home buyer assistance programs

We’ve put together a handy guide to first-time home buyer programs to help you get a foot on the property ladder. While several of these programs are available to homeowners across the country, you can learn more about state or city-specific programs by consulting a mortgage professional.

Getting pre-approved for a mortgage

Before you begin your home search, you should get pre-approved for a mortgage to figure out how much house you can afford. (Hint: HomeLight’s Affordability Calculator can give you a general idea.) A mortgage preapproval is based on your finances and a credit check. Homebuyers with preapprovals are more attractive to sellers as it’s less likely that their financing will fall through once they submit an offer on a home.

Growing trend of digital real estate services

Digital real estate services are changing the way the industry operates. “Online real estate services help make the search, acquisition, and closing process on a home much more efficient and less time-consuming than in the past,” says Ralph B. McLaughlin, formerly the chief economist at Kukun. “As such, buyers and sellers need to be ready to move at the speed of technology or else risk being left behind.”

More and more, consumers are taking advantage of fast, simple, and convenient online services — like those that HomeLight offers:

• Home Value Estimator: Get a ballpark idea of what your home is worth by answering a few simple questions.
• Affordability Calculator: Figure out how much home you can afford based on your income, savings, debts, credit score, and more.
• Net Proceeds Calculator: Estimate the cost of selling your home and how much you could earn from the sale.
• Agent Match: Connect with two to three top-performing agents in your desired market who fit your home buying — or selling — needs.
• Simple Sale: Get a competitive, all-cash offer for your home and close in as few as 10 days, with no repairs or prep work required. To get started, answer a few questions and you’ll receive a no-obligation offer in about a week.
• Buy Before You Sell: Unlock your home’s equity to purchase a new home with all cash and no contingencies. Sell your current home vacant with less hassle. Program available throughout the U.S. Visit our site or ask your agent about HomeLight Buy Before You Sell.

Another digital real estate service that continues to impact the industry is iBuying. iBuyers (the “i” stands for instant) have been around since the 2010s and are a solid option for home sellers seeking fast cash offers. Unlike We Buy Houses for Cash companies, who tend to purchase homes as-is and pay around 70% of market value, iBuyers like Opendoor and Offerpad look for homes in good condition and pay around 90% of market value while tacking on fees for their services.

According to reporting by HousingWire, major players in the iBuyer industry underperformed in 2023 amid a market slowdown, acquiring fewer homes and shedding profits. With mortgage rates expected to remain elevated in 2024, it’s likely that the iBuyer market will continue to face headwinds due to fewer buyers and higher-priced homes.

What else should you know about the 2024 housing market?

If I can’t find or afford a home, will it be wise to enter a rent-to-own agreement in 2024?

If you are struggling to come up with a down payment, have less-than-perfect credit, or don’t want to rent traditionally, a rent-to-own program might be a good fit for you. Always consult with an attorney before going this route, as many rent-to-own contracts strongly favor sellers.

What will be some of the hottest housing markets in 2024?

Heading into 2024, the National Association of Realtors (NAR) has identified several markets in the South and Midwest that are poised for significant homebuyer interest and an increase in home prices.

Austin-Round Rock-Georgetown, Texas ranked first, followed by Dallas-Fort Worth-Arlington, Texas. Midwest markets on the list included Dayton-Kettering, Ohio (#3) and Harrisburg-Carlisle, Pennsylvania (#5), although some would argue the Keystone State is technically part of the Northeast.

The Sunbelt continues to attract homebuyers, with Durham-Chapel Hill, North Carolina snagging the fourth spot and Nashville-Davidson–Murfreesboro–Franklin, Tennessee coming in at number seven.

If you’re home shopping in one of these hot markets, consider HomeLight’s Buy Before You Sell program, which allows you to unlock part of your home’s equity to submit an all-cash offer on your dream home without a home sale contingency. You’ll be able to sell your home vacant (no need to worry about dipping out for showings!) and avoid the hassle of moving twice. This program is now available throughout the U.S.

Get ahead of market trends: partner with an experienced top agent

Although we wish we had a crystal ball that could accurately predict where the housing market is heading in 2024, these projections are subject to change.

There will be competing forces that dictate how the market moves, including:

• Mortgage rates
• Home prices
• Housing inventory
• Inflation
• Labor market
• 2024 election

In an ever-changing housing market, it’s crucial to have a top-performing real estate agent to help you navigate the complexities of buying or selling a home.

Demystify the market by using our Agent Match tool to find the perfect real estate agent for you. Our tool analyzes millions of transactions, thousands of reviews, and other data points to find the best local agents to suit your needs.

Writer Dwayne Vega contributed to this article.

Header Image Source: (Joshua Rainey Photography / Shutterstock)