2024 Housing Market Trends: Will We See Affordable Home Prices?

As we continue into the 2nd half of 2024, prospective home buyers are keenly observing the evolving housing market trends to determine if affordable home prices are on the horizon. The spring home-buying season, anticipated to be promising, ended up being a thorny challenge for many, with elevated mortgage rates and high home prices stalling sales. However, a silver lining emerged as more resale inventory entered the market, putting some downward pressure on the pace of home price growth. Additionally, the median price for a new home has dipped below that of resale homes, with builders offering incentives to attract buyers. For those living in Metro Detroit or considering moving to Metro Detroit, these trends provide a glimmer of hope. Yet, experts agree that the market will only gain renewed momentum when mortgage rates drop sufficiently to alleviate affordability issues and encourage homeowners locked in at low rates to consider moving.

Housing Market Forecast for 2024

Despite the challenges posed by high mortgage rates, prohibitive home prices, and sluggish sales, experts maintain a cautiously optimistic outlook for the housing market in 2024.

Hopeful buyers, however, may need to temper their expectations for an imminent shift, as several persistent factors continue to impede progress. Notably, inflation remains stubbornly high, delaying the Federal Reserve's ability to lower the federal funds rate. This key interest rate, which influences overnight lending between banks, indirectly affects mortgage rates. With the federal funds rate at its peak in over two decades, the ripple effect has made home affordability a significant concern for potential buyers.

In the midst of these challenges, U.S. home prices have defied expectations by continuing their upward trajectory. The S&P CoreLogic Case-Shiller Home Price Index reported a 6.3% year-over-year increase in April, a slight deceleration from the 6.5% gain observed in March, yet still a record high.

While many industry analysts believe that a reduction in the Fed's rate could provide the much-needed boost to the housing market, the timing and certainty of such a cut in 2024 remain speculative.

Will the Housing Market Finally Recover in 2024?

A potential recovery in the housing market in 2024 hinges on several critical factors aligning favorably.

According to Keith Gumbinger, vice president at HSH.com, a significant increase in the inventory of homes for sale is paramount. This surge in available properties would alleviate the upward pressure on home prices, potentially stabilizing or even reducing them from their current peak levels.

Another essential element for market recovery is the cooling of mortgage rates. Recent trends have shown a promising decline, with the average 30-year fixed mortgage rate falling to 6.95% by early July. However, Gumbinger cautions against hoping for a swift decline in rates. A rapid drop could trigger a spike in demand, which might quickly deplete any inventory gains and cause prices to surge again.

Gumbinger advocates for a gradual reduction in mortgage rates, which would steadily improve purchasing opportunities for buyers over time. He also suggests that a return to mortgage rates in the upper 4% to lower 5% range would significantly benefit the housing market, enabling it to gradually return to the stability seen between 2014 and 2019. However, he notes that achieving these rate levels may take some time.

NAR To Implement Settlement Agreement Changes in August

In response to prolonged litigation, the National Association of Realtors (NAR) has agreed to a substantial settlement of $418 million to resolve a series of antitrust lawsuits initiated in 2019 on behalf of home sellers. Preliminary approval was granted by the court in April, with final approval anticipated in November. The NAR has announced that the new mandatory practices will be implemented starting August 17.

The revised regulations include a prohibition on broker compensation offers on multiple listing services (MLS), the private databases used by local real estate brokers to publish and share property listings. This significant change also shifts the responsibility of paying buyer broker commissions away from sellers, disrupting a long-standing tradition in the real estate industry.

Additionally, real estate agents using the MLS will now be required to establish written representation agreements with buyers, ensuring clarity and formalizing relationships.

Home sellers from the past decade may be entitled to a portion of this settlement. For details on filing a claim, visit realestatecommissionlitigation.com.

Housing Inventory Forecast: When Will There Be Sufficient Supply To Reduce Prices?

Despite an increase in resale homes entering the market, the inventory shortage remains critical and is expected to persist due to several contributing factors.

One significant issue is that many homeowners are "locked in" at historically low mortgage rates and are reluctant to sell and take on higher rates in an already expensive market. As a result, demand continues to exceed supply, a trend likely to continue in the near term.

Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm, predicts that a substantial increase in the supply of existing homes will not occur until mortgage rates drop back to the low 5% range, which is unlikely to happen in 2024.

Although new home construction has provided some relief, it has not been sufficient to bridge the inventory gap. According to Zillow, the U.S. is currently short by 4.5 million homes, an increase from 4.3 million homes the previous year.

The shortage of entry-level homes is particularly acute, perpetuating a cycle of high demand and inflated prices.

Home Builder Sentiment Dips

Builder sentiment has taken a hit, mirroring the summer heat's relentless rise.

The primary culprits for the pessimistic outlook in new construction are high mortgage rates and persistent inflation. According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence fell from 45 to 43 in May. This marks the second consecutive month of declining sentiment, indicating that more builders are feeling negative about future market conditions. A reading of 50 or above suggests that builders see favorable conditions ahead, making this downturn notable.

The slowdown in new home construction, which had been robust and somewhat alleviated the shortage of resale inventory, has become apparent. Data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) reveals a 2.9% month-over-month decline in permits for new single-family homes in May, reaching the lowest seasonally adjusted annual rate since June 2023. Additionally, housing starts dropped by 5.2%, and completions fell by 8.5% from April.

Despite the downturn, there is a glimmer of hope for prospective buyers. In May, 25% of builders reduced prices to stimulate sales, and many others were willing to offer various incentives, providing some relief in an otherwise challenging market.

Residential Real Estate Stats: Existing, New, and Pending Home Sales

High mortgage rates continued to stifle home sales transactions in May, impacting the market across existing, new, and pending home sales.

Existing-Home Sales

Existing-home sales experienced a slight decline of 0.7% in May, according to the latest National Association of Realtors (NAR) report. This marks the third consecutive month of decreases, driven by rising mortgage rates and home prices, which are discouraging potential buyers. Compared to May of the previous year, sales were down by 2.8%.

Experts anticipate that home sales activity will improve once inflation eases and the Federal Reserve begins to lower interest rates. However, many prospective buyers, especially first-time and lower-income buyers, may still find it challenging to enter the market, with the median existing home price reaching a new high of $419,300 in May, a 5.8% increase from the previous year.

Lawrence Yun, NAR’s chief economist, highlighted the widening gap between current homeowners and aspiring first-time buyers, noting that mortgage payments for a typical home have more than doubled since before 2020. On a positive note, resale inventory has been loosening, with a 6.7% month-over-month increase, reaching 1.28 million unsold homes by the end of March. Despite this, only 3.7 months of inventory are available at the current sales pace, whereas a balanced market typically requires four to six months of supply.

New Home Sales

Newly constructed homes are not immune to the effects of high mortgage rates either. Sales of new single-family homes dropped by 4.7% in May compared to April and were down 16.5% from the previous year, according to data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).

The slower pace of new home sales has resulted in inventory levels not seen since early 2008. This shift is beginning to give buyers more leverage, with sellers of existing homes increasingly offering concessions such as help with closing costs and funds for repairs, according to Lisa Sturtevant, chief economist at Bright MLS. Additionally, the median price for a new home decreased slightly to $417,400 in May, nearly $2,000 below the median existing-home price.

Pending Home Sales

The outlook for home sales in the coming months remains bleak for those living in Metro Detroit. NAR’s Pending Home Sales Index dropped by 2.1% in May, following a steep 7.7% decline in April. With mortgage rates remaining above 7% during most of these two months, pending transactions fell 6.6% year-over-year in May.

A pending home sale represents the stage in the purchase process where the buyer and seller agree on price and terms, serving as a leading indicator of closed existing-home sales within the following one to two months. The index’s reading of 70.8 indicates the slowest pace since the early days of the pandemic.

Despite the record-breaking home prices, experts expect some relief for buyers due to loosening inventory and signs of a slowing economy. Hannah Jones, senior economic research analyst at Realtor.com, noted that mortgage rates falling below 7% in June could potentially thaw the frozen buyer activity by the latter half of the summer for those moving to Metro Detroit.

Spring Home Shoppers Face Chilly Affordability Challenges: Will Summer Be Better?

The spring home-buying season was notably muted this year, with persistently high housing costs sidelining many potential buyers.

For the week ending May 30, when mortgage rates stood at 7.03%, buyers putting 20% down on a median-priced resale home at $419,300 faced a hefty monthly mortgage payment of $2,238, excluding property taxes and insurance. In stark contrast, a year earlier, a buyer purchasing a home at the median price of $396,500 with a 30-year fixed mortgage rate of 6.57% would be paying $2,019 monthly—$219 less.

This stark difference in affordability is reflected in the NAR Housing Affordability Index, which fell from 101.12 in March to 95.9 in April. A reading below 100 signifies that a median-priced home is out of reach for a typical family earning a median income.

Despite the challenging landscape, there is some optimism for prospective buyers. The First Time Home Buyer Outlook Report by First American Financial Corp indicates that the typical first-time home buyer can only afford 29% of homes for sale nationwide. However, Odeta Kushi, deputy chief economist at First American, suggests there is "a light at the end of the tunnel," with expectations for slower home price growth and lower mortgage rates.

Sam Khater, chief economist at Freddie Mac, highlighted in a recent press release that the 30-year mortgage rate had dropped to its lowest level in nearly three months, with further declines anticipated over the summer. This trend could provide much-needed relief for home buyers as the season progresses.

Pro Tips for Buyers and Sellers

Navigating the tight housing market can be challenging for both buyers and sellers. Here are some expert tips to help increase your chances of an optimal outcome.

Pro Tips for Buying in Today’s Real Estate Market

Hannah Jones, a senior economic research analyst at Realtor.com, provides the following advice for aspiring buyers:

Know Your Budget: Focus on what you can afford as a monthly payment rather than just the home price. Your monthly housing payment includes the home price, down payment, mortgage rate, loan term, home insurance, and property taxes.
Be Flexible About Home Size and Location: Your budget might fit a smaller home in a preferred neighborhood or a larger, newer home farther out. Prioritize your needs and be flexible to act quickly when a suitable home appears on the market.
Monitor the Market: Keep track of inventory and price levels in your desired area, and note how quickly homes sell. Being well-informed will boost your confidence in making an offer on a well-priced home. A real estate agent can assist with this.
Stay Positive: Buying a home is a major financial decision. Approach the market confidently with good information and realistic expectations. Avoid rushing into a purchase that doesn't fit your budget or lifestyle.

Pro Tips for Selling in Today’s Real Estate Market

Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, shares these tips for sellers:

Research Comparable Home Prices: Stay updated on the latest pricing trends for comparable homes in your area. Understand the competition and price your home competitively. In certain price ranges, it may be a buyer's market, so be ready to make concessions.
Ensure Your Home is in Excellent Condition: To stand out, your home should be well-maintained and have strong "online curb appeal." Buyers are attracted to well-kept homes and attractive front yards.
Work with a Local Real Estate Agent: A knowledgeable local agent with a strong marketing presence can offer significant value. Their access to major real estate portals can help you secure a great deal.
Address Issues Promptly: Make necessary repairs or improvements before listing your home. Removing potential buyer objections allows them to focus on the positive aspects of your property.

CLICK HERE TO GET YOUR FREE HOME VALUE IN SECONDS

Will the Housing Market Crash in 2024?

With home prices continuing their upward trend, concerns about a potential housing market crash—a sharp decline in unsustainably high home prices due to decreasing demand—are understandable. However, experts believe that the likelihood of a crash in 2024 remains low.

Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, emphasizes that the record low supply of houses on the market provides a buffer against a market crash. This limited inventory means that even as demand fluctuates, the scarcity of available homes helps sustain prices.

Furthermore, today’s homeowners are generally in a more secure financial position compared to those during the 2008 financial crisis. Many borrowers now have significant home equity, reducing the risk of widespread foreclosures that could flood the market and drive prices down.

Orphe Divounguy, senior macroeconomist at Zillow Home Loans, expects home appreciation to slow in 2024 but not to plummet. This sentiment is echoed by other market analysts. Bill Adams, chief economist at Comerica Bank, forecasts a 2.9% increase in national house prices in 2024.

Several factors are expected to sustain housing demand, including Millennials entering their prime home-buying years, wage growth, and overall financial stability. These elements create tailwinds that support ongoing demand for housing.

However, there are cautionary voices as well. Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, warns that markets where real estate investors have acquired numerous properties could see a price collapse if any destabilizing factors arise. This scenario, while not the prevailing expectation, remains a possibility.

In summary, while home prices may moderate, a significant crash in the housing market appears unlikely for 2024. The combination of low housing supply, strong homeowner equity, and continued demand from demographic and economic factors contributes to a more stable market outlook.

Will Foreclosures Increase in 2024?

Foreclosure activity in the United States has shown nuanced shifts recently, with lenders initiating foreclosures on 22,385 properties in May, marking a 3% increase from the previous month but a 4% decrease from a year ago, according to real estate data firm Attom.

While there was a slight uptick in foreclosure starts, completed foreclosures have dipped slightly compared to the previous month. Real estate-owned properties (REOs), which are homes that didn’t sell at foreclosure auctions and have been taken over by lenders, declined by 1% in April and were down 28% year-over-year. This indicates a degree of resilience in certain areas of the housing market.

Rob Barber, CEO of Attom, highlighted these nuanced shifts, suggesting that while there are slight increases in foreclosure starts, the decrease in completed foreclosures shows some stability in the market.

Experts generally do not anticipate a significant increase in foreclosures in 2024. Foreclosure activity remains below pre-pandemic levels, at about 70% of 2019 figures. One key factor contributing to the low levels of foreclosure activity is the substantial amount of home equity held by homeowners, including those in foreclosure.

According to the latest CoreLogic home equity report, homeowners with mortgages saw a collective increase of $1.5 trillion in home equity in Q1 2024, bringing total net homeowner equity to over $17 trillion, the highest since late 2022. This substantial equity provides homeowners, even those in early stages of foreclosure, with options to avoid foreclosure sales. They can leverage their equity to pay off past-due mortgage bills or sell their property to protect the equity they would otherwise lose at auction.

When Will Be the Best Time To Buy a Home in 2024?

Buying a house, regardless of the market conditions, is an intensely personal decision and often the largest financial commitment most individuals will make. Therefore, it is essential to ensure that one is in a solid financial position before making such a significant investment.

To estimate monthly housing costs, prospective buyers should utilize a mortgage calculator to understand their expenses based on their down payment and other factors. However, attempting to time the market is not a recommended home-buying strategy.

Orphe Divounguy, senior macroeconomist at Zillow Home Loans, asserts that timing the housing market, like other markets, is nearly impossible. He advises that the best time to buy is when a buyer finds a home they like, meets their family's current and future needs, and is within their budget.

Keith Gumbinger, vice president at HSH.com, concurs that it is challenging to advise potential homeowners to wait for better conditions. He notes that home prices tend to rise over time, making it harder to save for a down payment as the goalposts keep moving. There is no certainty that future market conditions will be significantly better than those of today.

Divounguy also emphasizes the value of "getting on the housing ladder" as it allows individuals to start building equity and net worth.

Ultimately, the best time to buy a home is when an individual is financially prepared and finds a property that fits their needs and budget. Waiting for an ideal market condition might not be as beneficial as taking the step when one is ready and can afford the purchase.

In summary, while the 2024 housing market presents its share of challenges, there are emerging trends that offer a glimpse of optimism for prospective buyers. Increased resale inventory and a decline in new home prices are beginning to moderate the pace of home price growth. However, meaningful relief will likely come when mortgage rates decrease, improving affordability and prompting more homeowners to sell. For individuals living in Metro Detroit or those considering moving to Metro Detroit, staying informed about these trends is crucial. As the market evolves, the key to navigating it successfully will be a combination of financial preparedness and strategic timing, ensuring that buyers are ready to seize opportunities as they arise.