So far, 2024 has been a tough year for the housing market with high mortgage rates, stubborn home prices, and sluggish sales—but things might be finally looking up.
The next six months should bring some welcome relief to homebuyers and sellers in the form of lower mortgage rates, according to the Realtor.com® midyear housing forecast for 2024.
Rates for a 30-year fixed home loan have already plunged to 6.47% for the week ending Aug. 8, according to Freddie Mac. That’s the lowest they’ve been in over a year.
And they could fall even further, with Realtor.com economists predicting a rate of 6.3% by the end of 2024.
“Economic signals suggest that the Fed should begin cutting its federal funds rate in 2024,” says Realtor.com Chief Economist Danielle Hale. This decrease is “long-awaited mortgage rate relief.”
While many other real estate predictions hinge on just how low rates go, here’s how the Realtor.com economist team predicts the housing market will unfold in the next six months, with plenty of hopeful news for both homebuyers and sellers.
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Mortgage rates will finally fall
The Federal Reserve has kept its benchmark borrowing rates high for years in an effort to tame inflation, but it has signaled a rate cut could be coming next month.
Recent data, including July’s jobs report, showed that unemployment was rising. This provides “evidence that Fed policy is working—perhaps working overtime—and a rate cut, even a large one, may be appropriate,” says Hale.
While mortgage rates don’t follow the Fed rates exactly, the two tend to move in the same direction. Any cuts to Fed rates should eventually help mortgage rates tumble, too.
“Although the Fed has not yet lowered rates this year, we expect it to do so beginning in September,” adds Hale. “We are going to see Fed rate cuts before the end of 2024, and they’re going to be bigger than we expected at the outset of the year.”
Home prices will remain sticky
One point of frustration for homebuyers struggling with high mortgage rates is that home prices have remained high this year, too.
“Despite elevated mortgage rates, rising inventory, and homes sitting on the market longer, prices continue to rise,” explains Hale.
As a result, the Realtor.com economics team expects prices to rise by 4.6% by the end of the year.
“Sales prices have continued higher with June being a new record high for the median existing-home sales price,” says Hale.
The mortgage ‘lock-in’ effect will ease
Over the past six months, the number of homes for sale has risen “more than anticipated,” says Hale, who anticipates a 14.5% gain in housing stock for the year.
“We have seen substantial improvement in inventory in the first half of 2024, climbing by more than 35% on a year-over-year basis,” she says.
The uptick can be traced to several factors: Buyers facing affordability headwinds sat out the market, and housing stock swelled. Meanwhile, sellers—many of whom are bound by the “golden handcuffs” of low interest rates—also came off the sidelines when rates fell earlier in the year.
“The lock-in effect is likely still holding back many sellers, but we expect this number to shrink as time passes,” says Hale.
However, housing stock is still below its pre-pandemic levels. Out of the 50 largest markets Realtor.com tracks, only 12 have returned to or exceeded their pre-pandemic inventory levels.
Home sales will remain sluggish
Spring’s usually busy homebuying season was slowed by high mortgage rates, with June existing-home sales dropping to 3.89 million, the lowest in six months.
Yet when rates fall, more sellers are expected to list their homes.
“Home sales for 2024 are expected to see a modest increase from the original forecast of 0.8%, totaling 4.1 million—a figure that would mark the second-lowest annual total since 2012,” says Hale.
But as rates subside, she adds, “This should facilitate more home sales and a more normal sales pace, slower than the overheated market that we saw over the past few years.”
While sellers “still have the edge,” it has “dulled over the past few years with higher rates.”
Rents will hold steady
One sector free from the ebb and flow of mortgage rates is the rental market, which has remained stable in 2024.
“The tug-of-war between rising multifamily completions boosting rental supply and elevated rental demand has resulted in a nationwide stalemate,” explains Hale. “We see demand from new households and continuing renters who might like to buy a home but find that today’s rent versus buy scales are tipped too far in favor of renting, but rental supply has kept up as builders work through the backlog of multifamily units under construction.”
The bottom line of where rents fall all comes down to the local level. While many metros are seeing new rental highs, the cost of renting a home in markets such as Austin, TX, and Las Vegas is more than 10% below recent peaks.
Hale adds that San Francisco is the only metro among the 50 largest markets tracked by Realtor.com where rents are back to 2019 levels.
The presidential election and housing policy
With housing affordability at near crisis levels, questions abound about whether the presidential election on Nov. 5 could help ease this pain. And the good news is that both presidential candidates say they’re committed to making housing more affordable.
“Housing affordability is a top concern for voters, and both candidates recognize the need to improve housing affordability,” says Hale. “That said, I don’t expect it to dominate the campaign because there just isn’t enough distance between the two parties on this issue.”
(Michael Ciaglo; Justin Sullivan/Getty Images)
Both candidates, Kamala Harris and Donald Trump, have previously served in the White House, making their economic policies more predictable.
The housing policies of both parties emphasize a shift from demand-focused strategies to supply-focused efforts aimed at boosting new housing construction. While their approaches differ slightly—Harris prioritizing affordable housing and Trump focusing on deregulation—both could help increase housing supply.
“We don’t expect the wild card election year to be that wild on the economy or housing market in 2024,” says Hale. “But the looming political battle over tax policy changes in 2025 will create volatility further down the road.”
The NAR settlement
The National Association of Realtors® settlement, which is slated to take effect on Aug. 17, is expected to have an impact on the real estate industry, particularly regarding commissions and house prices.
“Our take is that it will depend on macro conditions as much as industry and consumer adaptations and that any adjustments are likely to happen gradually over time,” says Hale.
In the past, home sellers often paid a commission that was then split between their listing agent and the buyer’s agent.
“Put another way, today’s sellers may be ‘writing the check’ for agents out of the sale proceeds, but home prices are likely higher as a result,” says Hale.
After Aug. 17, buyers may be responsible for compensating their own agent. If this norm changes, home prices could adjust to reflect the shift in buyer agent compensation “and do present a wild card for house prices not just through the end of 2024 but into 2025 as well,” says Hale.
