Is it a good idea to buy a house in the United States in 2024?

Unsurprisingly, home sales numbers have declined this year, experiencing a decline of nearly 17% from their peak in February to their low in October, according to data from the National Association of Realtors (NAR).

Contrary to expectations, home prices reached historic levels, registering a 7% increase since the beginning of the year and currently 1% above the 2022 peak, according to Case Shiller indicators.

The biggest surprise came from mortgage rates, which were near 8%. Freddie Mac reported that at the end of October, the average 30-year fixed rate mortgage reached 7.79%, the highest level in 23 years.

These factors combined to create the least affordable housing market in a generation. Sales of existing homes fell below 4 million units, a level not seen since 2010. Despite the decline in buyers, house prices continued to rise due to the shortage of properties in the market and competition among buyers.

What will happen in 2024?

“At the beginning of this year, I called it a year of disappointment,” said Jonathan Miller, president and CEO of Miller Samuel Real Estate Appraisers & Consultants. “Now I call it ‘the year of gradual change.’

Even though inflation is at its peak, the shadow of recession remains. The outlook is that 2024 will bring a gradual recovery in home sales, prices and mortgage rates, without major shocks.

rates will decrease

Mortgage rates have fallen for nine consecutive weeks, and are projected to continue falling into 2024, although they are unlikely to fall below 6%.

The average rate on a 30-year fixed-rate mortgage is down about a percentage point this year, hitting 6.61% at the end of December.

The impact of the Federal Reserve’s historic campaign to control inflation by raising interest rates on the housing market has been significant, as rising rates reduced demand and drove out potential buyers.

Skylar Olsen, chief economist at Zillow, highlighted, “Rising mortgage rates were probably the main reason for the housing market to stabilize in 2022 and 2023.” “The recent decline in rates has stimulated activity.”

Zillow projects mortgage rates will average around 6.8% through 2024, rising to near 6.5% at the end of the year.

NAR Chief Economist Lawrence Yun expects 30-year mortgage rates to drop on average, reaching 6.3% in 2024, and the Federal Reserve is cutting rates four times, which could ease tensions. Inflation situation.

better potency

In October, a typical buyer spent more than 40% of their income on mortgage payments, reaching an all-time high according to Zillow data dating back to the 1990s.

Mortgage rates are expected to decline in the new year and as more homeowners are willing to sell as the gap between their rates and current rates narrows, more homes are expected to come on the market, which will contribute to price stabilization in some locations. And will prevent growth in others. ,

Although those expecting a significant decline in prices may be disappointed, forecasts show that home values ​​will remain relatively stable in 2024. Zillow is predicting a minimum decline of 0.2%, while Realtor.com is projecting a 0.2% decline. Compared to 1.7% this year.

scheduled increase

The NAR forecast suggests a modest increase, with the median home price reaching $389,500 in 2024, an increase of 0.9% from this year.

According to NAR, with mortgage rates at 6.6%, the average American family can purchase a median-priced home without spending more than 30% of their income. With this approach, it is estimated that 4.5 million households will regain the ability to afford a moderately priced home.

Home sales are expected to increase in 2024
With increased inventory and slightly lower mortgage rates, existing home sales are projected to increase, according to NAR projections.

Sales of nearly 5 million new homes

Yun forecasts sales of 4.71 million existing homes in 2024, an increase of 13.5% from this year, which will close with sales of about 4.1 million units.

Continued new home construction is expected to boost inventory, with 1.48 million housing starts projected in 2024, including 1.04 million single-family and 440,000 multi-family.

According to Yun, based on pent-up demand, Austin, Texas, will lead the housing market, other metropolitan markets in the South will outperform others due to faster growth in employment, while markets in the Midwest will see benefits from becoming more affordable. ,

Cities performing better than the national average include Dallas and Fort Worth, Texas; Dayton, Ohio; Durham and Chapel Hill, North Carolina; Harrisburg, Pennsylvania; Houston; Nashville, Tennessee; Philadelphia; Portland, Maine; And Washington.