Predictions for the 2024 Housing Market: Is a Real Estate Crash on the Horizon?

The real estate market today is a topic of much debate among experts. While there is no consensus on whether the historically tight housing market will loosen or not, it is evident that the market has cooled significantly from its previous highs. The housing market today is still a seller’s market.

Home prices are rising, inventory is low, and mortgage rates are increasing. This makes it a challenging time to buy a home, but there are still opportunities for buyers who are prepared. In this post, we will discuss whether the real estate market is slowing down or going to crash.

Despite initial concerns of a housing market crash comparable to the Great Depression due to the pandemic, the market has remained stable. However, there are key factors to consider, such as rising home prices and potential declines in home sales due to supply-demand imbalances.

The impact of higher mortgage rates and recession fears has contributed to the market’s cooling from its peak earlier this year. Nevertheless, there are other factors that may influence the market’s pace and favorability for both buyers and sellers. The market is gradually shifting away from being heavily skewed towards sellers, moving towards more balanced conditions. Buyers are still showing interest, maintaining some level of competition, particularly for attractively priced homes.

While real estate firms generally do not predict a financial or foreclosure crisis on the scale of 2008, they do anticipate a return to more typical housing fundamentals. This moderation may be driven by increasing salaries and declining home prices. As the correction takes place, the housing market is expected to reach a more reasonable valuation and avoid being overvalued.

Mortgage rates will likely play a significant role in determining the decline in home values. Interest rates have a substantial impact on the real estate market, influencing mortgage payments, housing demand, and prices. Although home prices are still experiencing growth, the rate of increase has slowed compared to earlier in the year. Despite this, buyer interest remains high, resulting in a somewhat competitive market, especially for homes that are priced attractively and possess desirable features.

However, concerns persist regarding the housing market, particularly regarding the shortage of housing supply and rising interest rates. The shortage of supply has been a primary driver of home price growth, but the increasing interest rates are discouraging potential sellers and new construction. As a result, there is limited hope for an improvement in the housing supply and the establishment of a sustainable market that would benefit from increased inventory.

The significant increase in mortgage rates since last year has further exacerbated the already expensive housing market, making it even less affordable. Home prices saw a meteoric rise during the pandemic, driven by factors such as high demand, low supply, and record-low mortgage rates. However, the sudden surge in mortgage rates has slowed the market’s growth and affordability, posing challenges for buyers looking to enter the market.

As we explore the latest housing market predictions and forecasts for 2024, it becomes evident that the market’s trajectory remains uncertain. Factors such as interest rates, supply-demand dynamics, and affordability will continue to shape the housing market. Staying informed about these predictions will be crucial for prospective buyers, sellers, and industry professionals navigating the ever-evolving housing landscape.

According to Zillow’s Home Value and Home Sales Forecast (released in August) home values are expected to climb 1.8% in 2024. This is a modest decrease from last month’s projection of 2% growth in 2024. Zillow anticipates 4.1 million home sales for 2024, which would be 1% more than last year but lower than the previous forecast of 4.2 million home sales.

So far this year, sales have remained lower than the flow of homes coming on the market. As of July, inventory was 25% higher compared to a year ago.

Looking beyond 2024, easing inflation and more accommodating mortgage rates should improve affordability slightly. This would help stimulate housing activity, with both new listings and sales rising over the longer term.

Thomaston, GA is expected to see the highest growth in home prices over the next year with a projected increase of 6.8% by July 2025. Other notable MSAs include Kinston, NC and Edwards, CO, with growth rates of 5.4% and 5.3% respectively by the same period. The state of Georgia has multiple entries on the list, indicating robust growth in the housing market in that region.

According to the latest data from CoreLogic, as of June 2024, home prices in the United States have demonstrated a year-over-year increase of 4.7% compared to June 2023. On a month-to-month basis, home prices rose 0.3% from May to June 2024. This data is drawn from CoreLogic’s Home Price Index (HPI) which incorporates newly released public records to ensure accuracy through continuous revisions.

The CoreLogic forecast indicates a 0.3% increase in home prices is expected from June 2024 to July 2024. Looking ahead, home prices are projected to grow 2.3% on a year-over-year basis from June 2024 to June 2025.

While the U.S. has recorded its 149th consecutive month of year-over-year home price gains, the pace of that growth is decelerating. In June 2024, the national price growth of 4.7% is significantly lower than previous years, with only one state experiencing double-digit growth. Prices are anticipated to slow even further, predicted to rise only 2.3% year-over-year by next summer.

This cooling trend can largely be attributed to elevated mortgage rates, which continue to impact affordability. Although there are expectations of rate cuts by the Federal Reserve in September 2024, high interest rates have restrained market activity. The increase in inventory in several southern markets is exerting downward pressure on prices, resulting in some areas reporting year-over-year declines.

Dr. Selma Hepp, CoreLogic’s Chief Economist, noted that the market has witnessed a stagnation in activity, particularly at the end of the spring homebuying season. The month-over-month price increase of 0.3% is considerably lower than the historical average of 0.8% seen pre-pandemic. Additionally, there has been a notable increase in the number of states experiencing monthly declines—up to nine from three previously.

In summary, while home prices have continued to appreciate nationally, the pace of growth is slowing under the weight of high mortgage rates, affecting affordability and market stability. Homebuyers and investors should keep these trends in mind as they navigate the evolving housing landscape.