SEATTLE — Homebuyers may finally catch a break in 2024 as mortgage rates come down and listings go up.
That’s what Redfin is forecasting for the new year. The Seattle-based real estate brokerage released its annual predictions on Tuesday, noting it believes housing costs will remain high and continue presenting problems for young families, increasing the demand for large rentals. President Joe Biden will need to make affordability a cornerstone of his reelection bid in 2024, Redfin added.
Seattle-based Zillow’s predictions, released on Nov. 30, foresee much of the same. Its economists believe homebuyers will have more options and affordability, but only a bit after the 20-year-high mortgage rates of 2023. Single-family rentals will be the new starter home, Zillow predicts.
LOOK BACK | Redfin’s predictions for the 2023 housing market
“Buying a home will remain expensive, keeping pressure on the rental market to cater to families that will be renting longer than previous generations typically were,” Zillow wrote online. “Many of those who do buy will turn to homes that need some work, and do-it-yourself upgrades and repairs will keep new homeowners busy.”
According to Redfin, the median sale price in Seattle is $815,000, down 4.1% from a year ago. The average Seattle home value, according to Zillow, is $827,235, down 2.8% over the past year.
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Here are Redfin’s seven predictions for the 2024 housing market:
Prediction 1: Home prices will fall 1%
Could home prices decline for the first time since 2012? Redfin thinks so.
The brokerage predicts prices will fall 1% year over year in the second and third quarters, when the “home-selling season is in full swing.” The last decline in prices, in 2012, came when the housing market was recovering from the Great Recession. There was a brief decline in the first half of 2023 as well, Redfin points out.
“Home prices will still be out of reach for many Americans, but any break in the affordability crisis is a welcome development nonetheless,” Redfin wrote.
Prediction 2: New listings will tick up
Redfin said it has seen a double-digit annual increase in homeowners contacting it for help selling. It also has seen a small drop in requests from prospective buyers, Redfin said.
“Nearly all mortgaged homeowners have a rate below the current level,” Redfin wrote. “Many are starting to accept that rates won’t drop back to the 3s or 4s anytime soon, and they want to sell before prices fall.”
Prediction 3: Home sales will increase and end the year up 5%
Redfin said it expects 4.3 million sales nationwide in 2024, up 5% year over year, which would present a “crucial difference” between 2023 and 2024 as sales will gain momentum throughout the year instead of losing momentum.
Prediction 4: Mortgage rates will steadily decline — but remain above 6%
Nothing has dictated the housing market over the past year more than mortgage rates, and Redfin predicts the average 30-year mark will linger at 7% in the first quarter of 2024. But after that, the rate will fall to about 6.6%, Redfin added.
“The gradual decline in rates combined with the small dip in prices will bring homebuyers some much-needed relief,” Redfin wrote.
Prediction 5: Change will come to the real estate industry
Redfin believes many homebuyers will work directly with listing agents instead of hiring their own agent, and sellers may negotiate commissions with listing agents more often.
“As newspapers and real estate portals publish more information about commissions, homebuyers in 2024 will become even more aware of how much an agent costs, and less apologetic about negotiating commissions,” Redfin wrote.
Prediction 6: Renting will lose its stigma
As previously mentioned, renting may be the new American dream as many millennials and Gen Zers say buying a home is too expensive and no longer a goal.
Redfin foreshadows large rental unit prices to climb next year as “supply fails to meet demand.” Builders who have traditionally focused on producing smaller apartment units since 2019 will soon begin to increase their investment in “family-friendly rental units.”
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“Demand for large rental apartments and houses will climb as more young families embrace the renter lifestyle,” Redfin wrote. “With prices so high, buying a home doesn’t offer the same financial upside to young millennials and Gen Zers as it did baby boomers and Gen Xers. Rather than shelling out cash on agent fees, interest on a loan, property taxes, insurance and maintenance, many will decide that renting and investing their money in other ways makes the most sense.”
Prediction 7: Biden has a housing problem, which could hurt his re-election bid
Redfin said home prices have increased by more than 20% since Biden took office, presenting an obstacle in the incumbent’s reelection bid.
“Even though the overall economy is strong, high housing costs are making many Americans feel poor,” Redfin wrote. “That’s especially true for young people who don’t yet own a home. And even though affordability will become less of a problem in 2024, many Gen Z and millennial voters will be playing financial catch-up for a while.”
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Redfin said it expects Biden and his opponents to “make splashy housing policy proposals to try to lure voters who are unhappy with their economic prospects.”
“Democrats are likely to focus on subsidizing down payments for first-time homebuyers, promoting inclusionary zoning and funding housing vouchers, which are all popular with liberal voters,” Redfin wrote. “Republicans are more likely to focus on reducing regulations that limit development.”
Click here for Redfin’s full 2024 predictions, and click here for Zillow’s forecast.
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