Housing Market Predictions: What Homebuyers Should Know (2024)

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• In 2024, homebuyers can expect high home prices and lower mortgage rates later in the year.
• Hopeful buyers should start preparing as early as possible by saving money and improving their credit.
• Look into affordable mortgage programs and down payment assistance to boost affordability.

After watching mortgage rates hit two-decade highs and inventory plummet last year, many hopeful homebuyers are eager to get off the sidelines and into a home.

Fortunately, housing market conditions may ease somewhat throughout the rest of 2024 and beyond. If you're planning to buy a house this year, here's what you need to know about housing market predictions in 2024, and how you can prepare.

Overview of the housing market

The average home value in the U.S. is $362,481, according to Zillow — up 3.3% year over year. Last month, average 30-year mortgage rates fell to 6.05%, down 40 basis points from the month before.

For the past couple of years, mortgage rates have remained at decadeslong highs, while home prices have continued to climb, creating an affordability problem for homebuyers. The high cost of purchasing a new home has kept many would-be home sellers out of the market as well, further curbing an already-limited housing supply.

Overall, it hasn't been an easy few years for hopeful homebuyers, particularly first-time homebuyers, who often have less buying power and benefit most from lower mortgage rates and stable home prices. But affordability has slowly been increasing as mortgage rates have trended down, and they're expected to continue dropping.

Key factors influencing housing market trends

The housing market is impacted by many different factors, including macroeconomic forces, trends in new home construction, and current mortgage rates.

Right now, a few of the biggest forces influencing the housing market include inflation, high mortgage rates, and low housing supply.

Inflation and Federal Reserve policy

As inflation rose to record highs in 2022, the Federal Reserve started aggressively raising the federal funds rate in an attempt to bring it back down. This helped push mortgage rates up.

Since then, inflation has slowed significantly, with the consumer price index rising just 2.9% year over year in July 2024, down from June 2022's 9.1% peak. Because inflation has decelerated so much, markets now believe that the Fed will lower its benchmark rate multiple times this year. This should help mortgage rates trend down.

Though mortgage rates don't directly follow the federal funds rate, they often trend up or down based on how investors believe Fed moves will impact the broader economy.

Mortgage rates

Because mortgage rates are still relatively high, fewer people are interested in buying a home. Some may simply be unable to afford to buy at current rate levels, while others are waiting for rates to drop more so they can save money or enjoy increased buying power.

Sometimes, high mortgage rates can help put downward pressure on home prices, or at least keep them from rising as quickly. But because the U.S. has too little housing inventory, home prices have continued to increase in recent years.

Low inventory

A recent Zillow analysis found that the U.S. is 4.5 million homes short of a healthy housing supply. When a housing market doesn't have enough homes to meet the needs of the people living in that market, home prices and rent costs tend to go up.

Housing market forecasts for 2024

Mortgage rates are expected to drop this year, which will undoubtedly improve affordability for borrowers, but with that will come increased demand. This will keep home prices high and likely push them up even further. Finding a home in your price range may become even trickier, and you may need to make a lot of offers on homes before you get one accepted.

Home price predictions 2024

Experts generally expect home prices to increase throughout 2024.

• Fannie Maesees home prices rising 6.1% year over year by the end of 2024
• The Mortgage Bankers Association believes prices could rise 4.1% this year
• The National Association of Realtorsthinks existing-home prices will increase 3.8% overall by the end of 2024

Mortgage rate predictions 2024

Mortgage rates have dropped quite a bit in recent weeks, and experts generally predict we'll see mortgage rates go down further throughout the rest of this year. In fact, rates have dropped faster than most forecasts have been expecting, with 30-year rates now below 6% for the first time since early 2023, according to Zillow data. But they may trend down more slowly in the coming months.

How likely is a housing market crash in 2024?

Because home prices have increased so dramatically in recent years, doomsayers believe that the housing market is in a bubble, and it's only a matter of time before it bursts and the market crashes. But it's actually pretty unlikely that will happen.

One of the main reasons we're unlikely to see the housing market crash in 2024 has to do with housing inventory. The U.S. simply does not have enough homes to meet demand, so prices are likely to continue rising.

Of course, no one has a crystal ball. If demand were to plummet, home prices could start falling. A severe recession could cause this to happen, for example. But even with a recession, it's not a given that the housing market would crash as a result.

Is it true that it will never be a good time to buy a house?

There's a lot of pessimism around homebuying that's led many would-be buyers to resign themselves to a life of renting. While buying a home is certainly much more expensive now than it has been in the past, there are still opportunities for people to become homeowners, especially with how many first-time homebuyer mortgages and down payment assistance programs have become available in recent years.

It's now possible to get a mortgage with just 1% down and use down payment and closing cost assistance to limit the amount of cash you need to purchase a home.

Additionally, though home prices are unlikely to drop significantly, mortgage rates should. The lower your mortgage rate, the more you can afford to borrow, boosting your buying power even as home prices rise.

As builders add more housing supply over time, price increases should moderate and competition among buyers should ease as well. But it may take several years before we start to see the effects of this.

Is it a good time to buy a house now?

Whether it's a good time to buy a house depends on a lot of different factors, including current mortgage rates, local housing market conditions, and your financial situation.

Mortgage rates are generally heading down, which means it could be a good time to buy a house if you can afford to do so. You may also want to talk to a real estate agent about the current dynamics of your local housing market. If your market has a number of available homes in your price range and little competition, you could potentially get a good deal by buying now.

When will the 'silver tsunami' impact housing prices?

Even as mortgage rates drop, low supply will remain a problem for homebuyers. But we may see conditions shift in the coming years thanks to the so-called "silver tsunami," which refers to the potential impacts of an increasing number of baby boomers aging out of their current homes.

How the 'silver tsunami' could affect first-time homebuyers

Baby boomers are currently holding onto a lot of real estate. But as they get older and pass away or move into long-term care facilities like nursing homes, more and more of that real estate will be put back on the market. Because those seniors aren't looking to purchase another home to replace their current one, this adds new housing supply that wasn't there before.

This could help make it easier for first-time homebuyers and other cash-strapped borrowers to get into a home, since it will ease competition and allow prices to rise at a more moderate pace. However, it may take at least a few more years before we begin to see the impact of this.

How to prepare to buy a house in 2024: 5 tips

Here's what you should be doing to prepare for homeownership if you're planning to buy this year.

1. Get your finances ready

Because home prices are likely to remain high and mortgage rates may take a while to fully come down, you'll want to make sure you get the lowest rate you can.

One of the faster methods to get your credit score up is to lower your credit utilization. This will also decrease your debt-to-income ratio, which is another factor mortgage lenders look at when considering what rate to give you.

J.R. Russell, head of direct to consumer mortgage lending at Citi Mortgages, says homebuyers should consider paying off credit card balances to improve their scores.

"If you're trying to pay off or pay down some credit cards, start with the cards or credit lines with the highest interest rates first," Russell says. "Then, pay off the balances that are smallest. The good news is that if you do this, you'll improve your debt load and your credit score."

2. Look for affordable mortgages and other first-time homebuyer assistance

The key to affording homeownership for many buyers in 2024 will be utilizingmortgages geared toward first-time homebuyers and combining them with grants or other forms of down payment assistance.

"If you're not sure that your down payment will be sufficient, take time to understand all of the available products that you may be eligible for through the FHA or VA, your bank, or other local institutions," Russell says. "These programs may grant you access to down payment assistance and low-to-moderate income programs, among other game-changing resources."

Conventional loans allow down payments as low as 3%, while FHA loans allow 3.5% down payments. USDA and VA loans allow no down payment.

Look into lenders that offer special mortgage programs that come with additional assistance. Rocket Mortgage, for example, offers a ONE+ mortgage that allows borrowers to put down just 1%, with the lender providing a 2% grant.

Bank of America, another popular lender for first-time buyers, offers a couple of different forms of down payment assistance.

3. Time your purchase right

There probably won't be a single "best time" to buy in 2024, because that depends on each buyer's priorities — so it's important that you figure out yours.

If getting the lowest rate possible is most important to you, you'll want to wait until later this year to buy, or possibly even wait until 2025. Waiting until next spring or summer should also give you more inventory to choose from, but you'll likely be up against greater competition since it's the peak buying season.

4. But don't rush

"If rates do start to moderate and the market does seem to become more favorable to buying in 2024, it will likely stay this way for a while," Russell says. "If that's the case, I encourage you to take your time! Don't put pressure on yourself to make any potentially hasty decisions on what may be your biggest asset and the largest financial decision of your life."

Though it's still a while away, forecasts generally expect mortgage rates to fall throughout 2025. If you don't feel ready to buy this year, there's nothing wrong with waiting a bit to continue saving and working on your credit.

5. Build your savings

Whether you're padding your mortgage down payment savings or contributing to your emergency fund, tucking away some extra cash now is vital if you plan on buying a home soon.

When you buy a house, you'll need enough cash to cover both your down payment and closing costs, which can amount to between 3% and 6% of the loan amount. While many mortgage programs allow low down payments, the more you can put down, the better your interest rate will likely be. Plus, offers with larger down payments are often more attractive to home sellers, giving you a competitive edge in what will likely be a tough market.

Homeownership is also often more expensive than many first-time buyers realize, especially in the first year. Having some extra money set aside for unexpected costs will help ensure you don't go into debt when your first big housing expense comes along.

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