Some semblance of a buyer’s market in real estate could finally be on the way in 2024, bringing to a close a year of low inventory and record high prices. According to new housing market predictions from real estate companies Redfin and Zillow, buyers can expect improvements in inventory and prices in 2024, but mortgage rates may remain stubbornly high, slowing down the return to normalcy.
Listings and Home Prices Reversal
Zillow and Redfin predict a reversal in current trends for listings and home prices in 2024. Prices, which rose to record highs in 2023, are expected to start inching back downward. The increase in supply due to potential home sellers growing weary is anticipated to lead to more competition between sellers, benefitting buyers. Despite this, the predicted housing price drops are marginal, with Zillow expecting a decrease of just 0.2% and Redfin anticipating a decrease of about 1%.
Mortgage Rates Outlook
The bad news for both buyers and sellers is that mortgage rates aren’t expected to drop significantly in the near future. Redfin predicts rates dropping to about 6%, down from their current rate of over 7%. Meanwhile, Zillow suggests that rates will have some definite “staying power.” With mortgage rates staying fairly high, renting is expected to become more popular, as predicted by both companies.
Rise in Renting
Due to high mortgage rates and slow price drops, both companies anticipate more potential buyers embracing renting. Redfin points to a June survey showing that one in five millennials expects to never own a home, indicating a shift in attitude. Zillow predicts the new “starter home” to be the single-family rental, as buyers seek amenities like private backyards that some of the cheapest homes for sale lack. Additionally, urban areas may see a surge in renters as the price gap between suburban and urban rental costs narrows.
Cheaper and Streamlined Homebuying Process
Redfin expects increasing competition among real estate agents in the next year, leading to more negotiation over commission fees to the benefit of buyers. The fallout from a recent class action lawsuit against the National Association of Realtors is noted, giving buyers leverage in negotiating fees. Zillow envisions improvements in the homebuying experience through the adoption of artificial intelligence tools by buyers and agents, noting the current use of AI for tasks like writing listing descriptions and creating 3D content for listings.
In conclusion, while 2024 may bring positive changes in terms of home prices and inventory, the persistence of high mortgage rates is likely to impact the real estate market’s pace of recovery. The growing trend of renting and potential improvements in the homebuying process through increased competition and AI adoption are key considerations for both buyers and sellers in the coming year.
