The first half of 2024 has been a challenging time for the housing market, with high mortgage rates, persistent home prices, and sluggish sales. However, things may finally be turning a corner.
According to Realtor.com’s midyear housing forecast, the next six months are expected to bring some much-needed relief for homebuyers and sellers, particularly with lower mortgage rates.
As of the week ending Aug. 8, the rate for a 30-year fixed mortgage dropped to 6.47%, the lowest in over a year. Realtor.com economists predict that rates could fall even further, possibly reaching 6.3% by the end of the year.
“Economic signals suggest the Fed may start cutting its federal funds rate in 2024,” says Danielle Hale, Chief Economist at Realtor.com, signaling long-awaited relief for mortgage rates.
Here’s how the real estate market is shaping up for the remainder of 2024, with good news in store for both buyers and sellers.
Mortgage Rates Expected to Drop
The Federal Reserve has maintained high borrowing rates for several years to control inflation, but signs point to a potential rate cut as early as next month. July’s jobs report indicated a rise in unemployment, suggesting the Fed’s policies are working, possibly even over-correcting.
“Although the Fed hasn’t cut rates yet, we expect it will start in September,” says Hale, adding that larger rate cuts may arrive by the year’s end.
While mortgage rates don’t follow the Fed’s rates exactly, they usually move in the same direction. As the Fed lowers rates, mortgage rates are expected to decline, bringing relief to homebuyers.
Home Prices to Stay Steady
Despite high mortgage rates, home prices have remained elevated in 2024. Realtor.com forecasts prices will increase by 4.6% by the end of the year, driven by ongoing demand and limited housing supply.
“June saw a new record for the median existing-home sales price,” says Hale, indicating that price pressure remains strong despite market headwinds.
Housing Inventory on the Rise
The number of homes available for sale has significantly increased, with a 14.5% rise in inventory projected for 2024. However, while housing stock has improved by more than 35% year-over-year, it still remains below pre-pandemic levels in many markets.
Hale notes that sellers, who previously held off due to low mortgage rates, are starting to return to the market as rates stabilize. This trend is expected to continue as rates fall further.
Home Sales Will Stay Slow—But Improvement is Coming
June saw the lowest home sales in six months, as high mortgage rates kept buyers on the sidelines. However, with rates expected to fall, Realtor.com predicts a slight increase in sales, up to 4.1 million homes by year-end. While this remains one of the lowest sales totals since 2012, it’s still a step toward recovery.
Rents to Remain Stable
Unlike home sales, the rental market has been relatively steady in 2024. A balance between rising demand and increasing supply has kept rental prices stable in many areas.
Although rents are climbing in some cities, others—like Austin and Las Vegas—have seen prices dip by more than 10% below recent peaks. In San Francisco, rents have even returned to 2019 levels.
Impact of the Presidential Election
With the presidential election approaching, both candidates have signaled their commitment to addressing housing affordability, a critical issue for many voters. Though housing may not dominate the campaign, both Kamala Harris and Donald Trump have outlined plans to boost housing supply, which could help ease affordability challenges.
NAR Settlement and Its Impact on Commissions
The National Association of Realtors® settlement, set to take effect on Aug. 17, could have a significant impact on real estate commissions and home prices. The shift in how buyer agents are compensated may gradually reshape the market, potentially affecting home prices into 2025.
As the year unfolds, the real estate landscape is poised for notable changes, bringing hope for both buyers and sellers looking for more favorable market conditions.
