Economist Warns of Continued Home Supply Strain in 2024

The housing forecast for 2024 indicates a marginal ease in housing costs, but not to a significant extent, warning of continued strain on the existing home supply. Realtor.com’s forecast expects a downward trend in both mortgage rates and home prices, signaling a start to a slow affordability shift in the coming year.

Chief economist Danielle Hale highlighted that while there’s expected relief in mortgage rates, the prices remain relatively high, offering only a marginal decrease from the previous levels. The forecast predicts an average mortgage rate hovering around 6.8% in 2024, declining to 6.5% by year-end. Meanwhile, home prices are anticipated to decrease by about 1.7%, marking a welcome change after a decade-long increase. Despite this, the typical monthly cost for a median-priced home would still account for about 35% of the average household income. Hale noted that while these price adjustments might aid some new buyers, existing homeowners may remain reluctant to move due to the persistent high costs, leading to an estimated 14% decline in inventory year over year.

Anticipating a tighter supply of existing homes, Realtor.com foresees relief from rental properties and new constructions, acting as a buffer to ease competition in the housing market. However, Hale pointed out that a near-record level of rental supply under construction might keep the rental market’s supply ahead of demand. The forecast hinges on expectations of gradual mortgage rate declines alongside an economic slowdown and controlled inflation. However, unforeseen factors like geopolitical tensions and inflation could significantly alter this outlook.

There’s a concern that if inflation persists, it could lead to an increase in long-term interest rates, resulting in mortgage rates jumping higher than anticipated. Such fluctuations, observed over the past year, may discourage potential sellers and buyers, hampering home sales in the market.