Housing Market Predictions: Will Home Prices Drop in 2024?

The real estate domain witnessed a year filled with noteworthy changes and significant developments. High home prices and elevated mortgage rates have posed challenges for numerous potential buyers, leaving them wondering, “Will home prices drop in 2024?” As the holidays and colder weather approach, now is an opportune time to reflect on the state of the housing market and look ahead to hopefully more favorable conditions for buyers next year.

That begs several questions: Is it a good time to buy a house in the coming months? Will interest rates go down? Will the housing supply improve? For answers, we reached out to several real estate and mortgage industry pros, requesting their housing market predictions.

In this article:

• Current housing market overview
• When will home prices drop?
• Will mortgage rates come down?
• Will housing inventory increase?
• Will 2024 be a buyer’s or a seller’s market?
• Will the housing market crash?
• Housing market predictions FAQ

National housing market trends and stats

Over the past year, the real estate market has navigated through a challenging landscape. With fluctuating home prices, elevated mortgage rates, and a range of economic factors, prospective buyers, sellers, and investors have had to adapt to a dynamic environment.

Here’s what we know about the national real estate market, based on the latest data from the National Association of Realtors, Redfin, Freddie Mac, and The Mortgage Reports:

• $382,600 – median existing-home sales price (up 4.4% year-over-year)
• $395,850 – median asking price of existing homes for sale (up 6.3% year-over-year)
• 3.78 million – seasonally adjusted annual rate of existing home sales (down 6.2% year-over-year)
• 1 million (3.2 months’ supply) – inventory of unsold existing homes (up 2.9% year-over-year)
• 29 days – average number of days existing homes remained on the market in December (up from 26 days a year ago)
• 22.5% – share of homes selling above list price (up from 20% a year ago)
• 29% – percentage of home sales coming from first-time buyers (down from 31% in November)
• 6.77% – average conventional 30-year fixed mortgage rate at the time of this writing
• All-cash sales accounted for 29% of transactions in December (up 28% year-over-year)

But raw numbers don’t tell the whole story. For a more in-depth analysis of how we got here, perspectives on where the national housing market stands, and predictions on where interest rates, prices, inventory, and other key indicators are headed, we reached out to a variety of industry experts. Their insights and prognostications are shared below.

Current housing market overview

For a bird’s eye view of the real estate climate, we first asked the pros to sum up the current state of the U.S. housing market.

Rick Sharga, president/CEO of CJ Patrick Company: “I’d characterize the housing market today as boring and likely to stay pretty unexciting for the foreseeable future. Existing home sales are on pace to be at their lowest total since 2009, during the Great Recession. Prices have rebounded over the past few months, and are increasing on a year-over-year basis, but very modestly (1-2%). Inventory is inching up slightly from nearly historic lows, but still down between 40-50% from the same time in 2019, when we last had a relatively normal number of homes for sale. And mortgage rates continue to rise, discouraging homeowners with lower-rate mortgages from listing their homes for sale and making a home purchase unaffordable for more buyers.”

Shri Ganeshram, CEO of Awning.com: “The national real estate market presents a mixed bag of scenarios. On one hand, home prices have seen a steady climb, reflecting both the increased demand and the undeniable value people place on homeownership. Mortgage rates, while still low historically, have risen in recent months, causing some hesitations among potential home buyers. Inventory levels have been somewhat tight, especially in sought-after areas, driving up competition. Sales volumes have been robust, but with the occasional plateau, indicative of market saturation in specific areas. Home buyer interest remains high, but I’ve noticed a slight trend toward more informed and cautious buying. Remember when everyone was in a rush to get their slice of suburbia in the early 2020s? There’s more of a wait-and-watch sentiment now.”

Joseph Melara, owner of Residential Brokers: “The national real estate market is experiencing several noteworthy trends. Firstly, we’ve observed a slight decline in home prices on a national level. This is in line with seasonal patterns and is not indicative of a long-term trend. Additionally, mortgage rates have been rising as a measure to stabilize inflation, which is impacting buyer affordability. Inventory levels have continued to decrease, largely because many current homeowners are holding onto their properties due to lower interest rates, resulting in reduced housing mobility. Sales volumes have declined proportionally in both the detached and attached markets, aligning with the seasonal dip in prices. However, despite these fluctuations, it’s important to note that the market remains relatively stable.”

Ralph DiBugnara, president of Home Qualified: “The current real estate market is one we have never seen before, with a combination of higher interest rates, high inflation, and lack of homes for sale to meet the demand of potential buyers. But buyers, even those willing to pay high prices, are less likely to follow through on purchasing a home if it is in disrepair. That’s the difference from when payments, rates, and inflation were lower. At the increased cost across the board, buyers want a better finished product.”

Nick Ron, owner/founder/CEO of House Buyers of America: “Market activity is cooling due to eye-popping home prices and interest rates. But even though the national average 30-year mortgage rate has jumped to a nearly 23-year high, buyer interest remains relatively high and the housing market is still competitive for prospective buyers.”

Will home prices drop in 2024?

The outlook for home prices in 2024 varies among experts. While some anticipate a potential drop of 5-10% due to factors like softening demand, affordability issues, and economic uncertainty, others predict rising prices, driven by continued high demand and low supply. Factors such as local market conditions, employment trends, and regional dynamics will play a significant role in determining the direction of home prices.

Andrew Lokenauth, owner of BeFluentInFinance: “Home prices will likely drop 5-10% nationally in 2024 as demand softens further. Affordability issues, economic uncertainty, and moderating investor activity will weigh on prices. Of course, the exact amount prices will reduce will depend on local market conditions and employment trends.”

Jeremy Schachter, branch manager with Fairway Independent Mortgage: “Home prices will rise in 2024. With the demand still being high and supply low, this will drive up home values, especially if rates come down, which will increase demand even more.”

Glenn Phillips, CEO of Lake Homes Realty: “Housing prices nationally will level off on an average basis, with some markets slightly rising, some dropping, all based on local demand and that local demand’s local economic conditions.”

Ron: “I expect house prices to rise around 3% to 4%. But at some point in 2024, I see a slowdown in price growth. The slowdown will be due to a combination of factors such as rising interest rates, an increase in the supply of homes, a decrease in demand, and affordability challenges for buyers. That said, I’m not anticipating a drop in prices nationwide. Rising construction costs and a slowing economy as a result of prolonged high interest rates will also impact the housing market in 2024.

Ganeshram: “Given the current trajectory and economic indicators, I anticipate a moderate rise in housing prices nationally. The reason is consistent demand, especially in suburban and exurban regions. The urban exodus, sparked by remote work trends, hasn’t entirely plateaued. Add to that the narrative of some of my peers in the real estate industry: Many of them anticipate new housing developments in 2024, which could initially moderate prices. But expect prices overall to rise as supply tries to catch up with demand.”

Sharga: “Home prices will probably rise slightly in 2024, perhaps by 2-3% as demand continues to outpace supply. However, this will not be universally true; some formerly high-flying markets like the Bay Area in California, Austin, and Phoenix could see prices continue to fall, while cities in the Southeastern states may see prices rise more quickly.”

Melara: “I anticipate that national housing prices will continue to experience a mild drop in 2024. This decline is expected to be a result of seasonal fluctuations, similar to what we’ve seen historically.”

Will mortgage rates come down?

The outlook for mortgage rates in 2024 continues to be a subject of debate among experts. While some predict a slight decline in mortgage rates, others expect them to remain relatively high, influenced by economic factors, inflation, and Federal Reserve policy. This uncertainty leaves both buyers and sellers cautiously monitoring the mortgage rate landscape throughout the year.

DiBugnara: “Mortgage rates, on average, will be down in 2024 compared to 2023. But I do not believe they will drop as low as previously predicted by forecasters. An average interest rate in the mid 6% range for a 30-year fixed-rate loan is where I believe we will land.”

Ron: “Sometime in the first half of next year we will see slightly lower, but still elevated, mortgage rates. As the economy decelerates, rates should go down. At some point in 2024, the Fed will start lowering rates as they see inflation decline and unemployment increase. Rates will still be high enough that home buyers continue to be challenged by affordability, and sellers will still be reluctant to give up their low existing mortgage rates.”

Sharga: “Mortgage rates are likely to decline, slowly but steadily, over the year. This decline should begin once the Federal Reserve confirms that it’s done raising the Fed Funds rate for this cycle. But borrowers shouldn’t expect to see mortgage loans with 4% interest rates; it’s more likely that rates will gradually work their way down from 7%, and possibly end next year just below 6%.”

Lokenauth: “Rates could fluctuate in 2024 based on inflation and Fed policy, but I expect rates to average in the 5-7% range. A strong labor market and slowing inflation could lead to rate cuts in the second half of 2024, but higher rates of at least 6% seem likely to persist throughout 2024.”

Will housing inventory increase?

While some experts anticipate a modest home inventory increase due to factors like rising interest rates and market dynamics, others argue that new construction may lag, maintaining tight inventory levels. However, one consensus remains: the housing market’s supply-demand balance continues to be a focal point for homeowners and prospective buyers alike.

Here’s what some mortgage pros had to say:

Phillips: “Supply will rise slightly in 2024. The reasons? Those who have been postponing selling—especially because they don’t want to give up their current low mortgage rates—may finally need to move, plus natural market churn will occur. However, no drastic change will flood the market with inventory, and buyer demand will remain strong in 2024.”

Lokenauth: “Supply will gradually rise in 2024 as profit margins drop and sellers are less rushed. But new construction is lagging, keeping inventory tight for the long term. I expect to see 5-10% more listings nationally in 2024.”

Sharga: “New home inventory is likely to increase a little bit next year as home builders ramp up activity to meet market demand; but the inventory of existing homes for sale will probably be flat as homeowners remain locked in by low interest rates on their current mortgages. Almost 70% of mortgage loans today have an interest rate of 4% or lower. We’re unlikely to see many of those homeowners list their properties for sale until rates drop significantly, probably to 5.5% or lower.”

Ron: “I see some increases in housing inventory in 2024 due to rising interest rates, affordability challenges for buyers, and a decrease in demand. But in general, the national housing shortage will continue through the end of the 2020s. Due to the estimated pent-up demand for housing, it will take time for the nation’s builders to find suitable land, skilled labor, and materials to create a much-needed supply. Innovation in regulatory technology can also help increase the supply of housing and make it easier to build new homes faster.”

Melara: “Housing inventory is anticipated to continue its decline into 2024. The primary factor contributing to this trend is the reluctance of existing homeowners to sell. This reluctance to move is reducing the overall supply of homes.”

Will 2024 be a buyer's or a seller's market? 

While some experts anticipate a continuation of a strong seller’s market due to high demand and limited inventory, others suggest a gradual shift towards a more balanced market, giving buyers slightly more leverage. The outcome may vary by region and housing conditions, making it crucial for both buyers and sellers to stay informed and adaptable in the evolving real estate landscape.

Here are the insights shared by some of the experts we interviewed:

Sharga: “2024 will remain a strong seller’s market unless mortgage interest rates drop much further and faster than most economists are predicting. The market still has strong, demographically driven demand as millions of millennials approach the prime age for buying a home, and there simply isn’t enough inventory to meet this demand. So in most markets, sellers will continue to be in the driver’s seat.”

Lokenauth: “The advantage will shift toward buyers in 2024, as they will benefit from more options and negotiating power. However, markets lacking inventory may still favor sellers.”

DiBugnara: “2024 will continue to be the year of the seller. Homes have record equity available, but a lot of owners still have very low mortgage interest rates and no desire to join the madness of today’s market to buy. Inventory will not get to a point that allows a buyers’ market to materialize.”

Ganeshram: “A pendulum always swings, doesn’t it? While 2023 seemed dominantly to be a seller’s market, 2024 might bring a shift. With the predicted rise in inventory, buyers might have a little more leverage than before. But don’t expect a full swing – it’ll be more of a balanced market, in my opinion.”

Ron: “It will be a seller’s market in 2024 because of the national housing shortage expected through the end of the 2020s. I expect to see more buyers join with friends and family members to purchase homes, as intergenerational households, grown children boomeranging homes, and families created from friendships increasingly pool multiple income sources to purchase homes and avoid the uncertainty of housing costs as renters.”

Will the housing market crash?

Interested in understanding which areas pose a higher risk for real estate investments and which ones are safer to purchase in the coming year? According to data from ATTOM, the top 10 U.S. counties that currently present the lowest risk of experiencing declines in the housing market are:

1. Chittenden County, VT
2. Benton County, AR
3. Fairfax County, VA
4. Prince William County, VA
5. Shelby County, AL
6. Cass County, ND
7. Middlesex County, MA
8. Brown County, WI
9. Rutherford County, TN
10. Sarpy County, NE

Meanwhile, although it didn’t provide a full ranked list, ATTOM recently revealed that the most at-risk markets (for declines, based on home affordability, foreclosures, and other measures) in the country right now include California (five counties in the central region), Illinois (seven counties in the Chicago metropolitan), and New Jersey (six counties).

Is the fact that so many key markets are susceptible to price drops and foreclosures a sign that a housing crash could be on the horizon for 2024? Here’s what our panel had to say:

Schachter: “There will not be a housing recession or market crash. Overall, inventory is the biggest reason. For instance, in the Phoenix metro area, there were, on average, 40,000 to 50,000 homes on the market back in 2008 versus 8,000 to 10,000 homes today. Fifteen years later, our population has also increased.”

Ganeshram: “Based on current indicators, I don’t foresee a housing market crash in 2024. However, a mild correction or plateauing of prices in certain regions is possible. Awning.com data indicates that markets like San Francisco and New York City have shown volatility, making them riskier bets in 2024. On the safer side, mid-sized cities such as Boise, Idaho, and Madison, Wisconsin, offer stable growth and lesser fluctuations.”

Sharga: “I expect to see home sales remain weak over the next year, probably on par with this year’s projected sales of about 4 million existing homes and 650,000 new homes, one of the lowest numbers in years due to low inventory and poor affordability. The supply/demand imbalance should prevent a price crash, though a few markets may continue to see prices correct slightly.”

Lokenauth: “I don’t foresee a 2008-style crash next year, given tighter lending standards. But I expect a significant housing slowdown and price correction falling short of a recession. I anticipate the riskiest housing markets in 2024 being Boise, Austin, and Phoenix, and the safest being in the Midwest, South, and smaller metro areas.”

The bottom line: Is it a good time to buy a house? 

Should home shoppers claim a home soon or wait things out? Will home prices drop in 2024 enough to make a home purchase a wise choice next year? The experts weighed in.

Sharga: “Buyers who are waiting for a price crash in housing are very likely going to continue to be disappointed, as prices in most markets next year will either be flat or go up slightly. Waiting for mortgage rates to fall may not be a good strategy, either, as marginally lower rates will probably bring more buyers to the market, increasing demand for limited inventory and causing prices to rise more quickly. So if a buyer finds a home he or she likes and can afford at today’s prices and mortgage rates, and plans to stay in the property for at least a few years, they’re probably better off buying now than waiting.”

Ganeshram: “If you find the right property that meets your needs and fits your budget, 2024 could be a great year to invest. Waiting for the perfect moment can sometimes mean missed opportunities. However, it’s crucial to ensure you’re making informed decisions. Consider interest rates, your financial stability, and long-term goals before jumping in.”

DiBugnara: “If the home fits a budget you can afford, it is still a good time to buy today and in 2024. Home prices will increase over the next couple of years, which means as an owner, you will have earned increased equity and growth in your investment.”

FAQs

Will there be a housing recession in 2024?

None of the experts we surveyed expect a housing crash or housing recession next year. Market indicators do not point to a real estate bubble waiting to burst, especially comparing key metrics today to the 2008 Great Recession.

Should I buy a house in 2024 or wait?

Whether or not you should purchase a home will depend on your financial readiness, creditworthiness, ability to qualify for a mortgage loan, job security, and risk tolerance. Mortgage rates and home prices may decrease in the coming months, creating an ideal window for buying; or, they could rise further, making it more difficult to afford a home. To make a more informed decision, consult closely with a trusted Realtor/real estate agent, lending expert, and financial advisor.

Will mortgage rates drop in 2024?

Most of the professionals we polled agree that mortgage rates should come down next year from their current highs, but much will depend on economic conditions and decisions by the Federal Reserve.