BAM Key Details:

  • Redfin’s chief economist Daryl Fairweather predicts some relief for buyers in 2024, with home prices and mortgage rates expected to decrease by year’s end.
  • Fairweather also foresees shifts in the real estate industry at large and changing sentiment towards renting. 

Zillow, and Redfin all agree on one thing—2024 is likely to bring a bit of relief for homebuyers. This week, Redfin’s chief economist Daryl Fairweather shared seven predictions for next year’s housing market, which include a decline in home prices and mortgage rates over the course of the year. 

Unlike other forecasts, Redfin also expects to see more inventory by the end of 2024—something that should make the whole industry smile. The predictions also highlight potential shifts in the real estate industry, such as increased direct interaction between homebuyers and selling agents, and a changing perception of renting due to affordability challenges for homebuyers.

Take a look at all of Redfin’s predictions below. 

#1—Home Prices to Fall 1%

Home Price Predictions 2024

Source: Redfin

Redfin economists anticipate a 1% year-over-year decline in home prices during the second and third quarters of 2024. If this holds true, it will be the first home price decrease since 2012, apart from a brief period of decline in 2023. 

Though slight, this dip could provide relief in the ongoing affordability crisis, especially as home prices conclude 2023 with a 3% year-over-year increase.

#2—New Listings to Increase

More good news for buyers: an increase in new home listings is also expected, contributing to the anticipated decline in home prices. The surge in supply is expected to outpace demand, fueled by a double-digit annual rise in homeowners seeking assistance to sell their homes. 

As the mortgage-rate lock-in effect diminishes, listings are projected to rise from the record low observed in 2023. Homeowners, particularly in regions with higher-than-average price surges over the past couple of years, are keen on capitalizing on their equity and relocating to more affordable areas.

#3—Home Sales to Increase by 5%

Home Sales Prediction 2024

Source: Redfin

As Byron Lazine noted in Wednesday’s Hot Sheet, this is his favorite prediction yet. After all, record-low inventory has been a challenge since 2020, so any increase is good news.

Redfin economists project a significant upswing in home sales for 2024, with an estimated 5% year-over-year increase, reaching a total of 4.3 million sales. 

The momentum will start in the first quarter, with sales on pace for 4.1 million annually, up from the fourth quarter of 2023. This positive trajectory is anticipated to continue throughout the year, culminating in a pace of 4.5 million sales by the fourth quarter. The key distinction from the previous year lies in the sustained momentum, with home sales gaining traction instead of losing it as the year progresses, fueled by improved affordability and an increase in new listings.

#4—Mortgage Rates to Decline but Remain Above 6%

Mortgage Rate Prediction  2024

Source: Redfin

A steady decline in mortgage rates is expected throughout 2024, starting at 7% in the first quarter and reaching approximately 6.6% by year-end. 

Despite this decline, rates will persist above the 6% mark. This shift is attributed to the market’s belief that the U.S. will avoid a 2024 recession, prompting the Federal Reserve to maintain rates at the start of the year. Come summer, the expectation of subsequent rate cuts is foreseen to drive the gradual decline in mortgage rates as the year progresses. 

This easing, coupled with a slight decrease in home prices, is poised to offer some relief to homebuyers in need.

#5—Changes in the Real Estate Industry

With class-action lawsuits and an unfavorable verdict in the Sitzer/Burnett trial, big changes could happen in how real estate works in 2024. More homebuyers may directly work with the agent selling the home, instead of hiring their own agent. This could be because of increased awareness of agent costs. 

Legal action might also speed up changes in how fees are set between listing and buyer’s agents, potentially leading to a future where one agent gets most of the fees. Redfin views these foreseen changes as positive for consumers, giving them more choices and possibly lower costs.

#6—Renting to Lose Stigma

Redfin’s 2024 housing market prediction also foresees a changing landscape with a rise in demand for larger rental apartments and houses, particularly among young families who are increasingly embracing the renter lifestyle. 

The shift is attributed to factors including the unaffordability of homes for sale and financial constraints hindering down payment savings. The prediction suggests that the high costs associated with buying a home, including agent fees, loan interest, property taxes, insurance, and maintenance, may lead younger generations to opt for renting and investing their money elsewhere. 

While prices for large rental units are expected to climb due to demand outpacing supply, smaller rentals may experience downward price pressure due to more new builds hitting the market. In addition, builders are expected to shift their focus away from smaller units and towards family-friendly rental units to meet the evolving demands of the market.

#7—Housing Challenges for President Biden

Redin’s final prediction suggests that the current housing problem could impact President Biden’s re-election bid, as home prices have surged by over 20% since he took office. 

Despite a strong overall economy, the steep rise in housing costs is causing many Americans, particularly young people who haven’t yet entered homeownership, to feel financially strained. While the affordability situation is expected to improve in 2024, the prediction notes that Gen Z and millennial voters may still be grappling with financial challenges. 

Anticipating a response to this issue, Redfin expects both President Biden and his opponents to introduce prominent housing policy proposals to appeal to voters dissatisfied with their economic prospects. 

For more 2024 trends and forecasts from Redfin’s economists, head to Redfin.