Real Estate Trends to Watch in 2024: Housing Market Predictions

The housing market saw its fair share of ups and downs over the past few years. As we enter 2024, there are several key real estate trends that buyers, sellers, investors, and agents should keep an eye on. By understanding where the market may be headed, you can make informed decisions about your next real estate transaction.

Interest Rates Expected to Rise

One of the most impactful factors in the housing sector is mortgage interest rates. Rates increased throughout 2022 and are expected to continue rising in 2024. The Federal Reserve boosted rates several times last year and has signaled further hikes are on the horizon as they try to combat high inflation.

Higher interest rates mean reduced buying power for home buyers. Those looking to purchase real estate in 2024 will likely face higher monthly mortgage payments compared to recent years when rates hit all-time lows. This could price some first-time home buyers out of the market. At the same time, higher rates also deter current homeowners from selling or trading up.

Home Prices Stabilizing After Rapid Gains

Home prices rose at unprecedented levels in 2021 and early 2022. For example, the S&P Case-Shiller Home Price Index saw a peak year-over-year gain of over 20% in early 2022. However, in the second half of 2022, price growth began decelerating across most markets. This slower rate of appreciation is expected to continue through 2024.

Higher mortgage rates, economic uncertainty, and reduced affordability are slowing demand. With less competition, the housing market is rebalancing away from an intensive seller’s market. While nationwide home prices may see slight gains in 2024, experts don’t expect returns close to the past few years. Some localized markets may even experience price drops.

The Return of Seasonality

The housing market has been anything but normal over the past three years. The typical seasonal patterns were upended by the pandemic real estate boom. However analysts predict seasonality will return in 2024.

Generally, the best time to sell real estate is spring and summer when buyer demand peaks. Sellers who get their properties on the market early take advantage. As winter approaches, demand tends to cool just like the weather.

If mortgage rates rise further next year as projected, expect a more pronounced winter slowdown. Buyers are likely to push pause on their home search once higher borrowing costs sink in. But come springtime, warmer weather and school being out may renew some buyer enthusiasm.

Continued Low Inventory

Despite reduced competition and bidding wars, low inventory remains an ongoing issue limiting home sales. There simply aren’t enough homes being listed to satisfy current buyer demand. Construction of new homes slowed dramatically during the pandemic and has been hampered by supply chain issues, labor shortages, and rising costs.

While building is picking back up, it likely won’t reach pre-pandemic levels in the immediate future. Existing homeowners are also hesitant to sell with rising rates locking them into lower monthly payments. All this limits options for buyers. Until inventory opens up further, it will restrain the overall pace of sales.

The Investment Outlook

Investors stepped up their purchases of single-family homes over the past couple of years, accounting for over 25% of transactions in some markets. Big corporate investors spent billions buying detached homes for use as rental properties. Small “mom and pop” investors also got in on the action hoping to profit from skyrocketing prices.

But the buy-to-rent calculus is changing fast with higher rates and easing prices. Investors may start to sell off underperforming properties as the market shifts away from the ultra-profitable conditions of 2021-2022. However, demand for single-family rentals remains extremely high across the country. Investors with long time horizons are likely to retain properties and prospective ones may take a wait-and-see approach in 2024.

Urban vs. Suburban Demand

During the pandemic, many Americans fled dense urban areas seeking larger suburban homes better suited for remote work and home schooling. In fact, suburban and rural markets vastly outperformed their urban counterparts, driving record median price gains.

But recent data shows buyers slowly returning to downtown city neighborhoods, lured by price drops, falling rents, and vibrant cultural amenities. Inventory is also more abundant closer to urban cores. However, concerns over rising crime and homelessness could limit an urban rebound. Look for the scales to tip back towards a balance between urban and suburban demand in 2024 as affordability and quality of life factors dominate location preferences.

Innovative Home Technologies

Green building features, smart home devices, accessory dwelling units (ADUs), and artificial intelligence will take on greater prominence in housing this coming year. As climate change impacts mount, energy efficiency is a top priority for homeowners. Expect solar power, battery storage, electric vehicle charging, low-flow plumbing, and high-performance insulation to feature more prominently in new construction and remodeling projects.

Additionally, automated smart homes and AI tech will enable more elderly homeowners to comfortably age in place. Voice assistants, app-based climate and security controls, fall alerts and medication reminders are easing independent living. Accessory dwelling units like backyard cottages and converted garages serve multi-generational families and can provide rental income potential.

Bottom Line

The turbulent housing market appears to be entering a state of normalization in 2024. While risks such as recession loom on the horizon, experts foresee a balancing trend in terms of prices, inventory, and buying activity outperforming the extremes of recent years. The market faces uncertainty but remains underpinned by strong demographic demand for housing.

Whether you’re looking to buy, sell, or invest in real estate this coming year, understanding these key trends will position you to navigate the shifting terrain. Work closely with an experienced local real estate professional to determine how market changes could impact your personal situation and real estate decisions.

The Meyer Blue Condo features modern finishes with a neutral color scheme of blue and grey tones. Located downtown, it offers scenic city views along with access to parks, dining, entertainment, and employment hubs. Contact a real estate agent today to learn more or schedule a tour.