2024 Housing Forecast: What to Expect with Rates, Prices, and the Economy
webadmin • January 16, 2024
2024 Housing Forecast: What to Expect with Rates, Prices, and the Economy
2023 will go down as one of the worst years in recent memory for the housing market.
It started with a continuation of negative trends from the end of 2022 and turned into the least affordable year for home buying on record. But even though high mortgage rates resulted in a severe drop in home sales, they also kept a lot of would-be sellers "locked in" to their low mortgage rates, and home prices continued to rise throughout the year as a result.
At the end of the year, activity slightly increased as positive inflation signals brought rates down. But will that continue as we move into 2024? And if it does, will more homebuyers enter the market? How will that increased demand impact home values?
To help with this analysis, we turned to Barry Habib and MBS Highway The data below is pulled from their 2024 Housing Forecast report.
Mortgage Rates
First things first, mortgage rates. While we expected mortgage borrowing costs to fall in 2023, they defied expectations and ended up reaching multi-decade highs.Rates began the year 2023 on a downward slope, but quickly reversed course and surpassed 7% by spring. Things got even worse as rates climbed beyond 8% in October.
However, inflation has since cooled and economic reports continue to signal that the worst of it could be over. The Federal Reserve has also gotten on board, and they are very optimistic about rate cuts in 2024. After raising rates 11 times in less than two years, there could be three or more cuts next year.
While the Fed doesn’t directly control mortgage rates, their monetary policy tends to correlate. As they cut rates in the face of a cooling economy, mortgage rates should also fall.
We anticipate 30-year fixed rates to decrease throughout the year, possibly reaching as low as the mid-5% range by December. The way things are going, it could come sooner. And rates could go even lower, potentially dropping into the high-4% depending on loan product and qualification factors.
30-year fixed rate mortgage
- Mid-5% to high-6%
- Under 6% should unlock move-up buyers
10-year Treasury
- 3% to 4.4%
- Return to more normal spreads could cause mortgage rates to drop further
For current homeowners, this also means there will be more opportunities to refinance.
There were about $1.3 trillion in home purchase loan originations during 2023, despite it being a slow year. And rates have since come down quite a bit from what will likely be the highest point in this cycle.
Considering all those high-rate mortgages that funded over the past two years, we're confident there will be a large pool of homeowners who will benefit from refinancing their current loans and see substantial savings on their monthly payments.
In addition, we might see homeowners tap equity via a cash out refinance if rates keep coming down and get closer to their existing rate.
Housing inventory hit historic lows during the pandemic and a lack of supply has been a major constraint on the housing market. Supply has continued to remain low largely because of the "rate lock-in" effect.
Many homeowners who likely would have listed their homes for sale decided to stay put last year because of their ultra-low rates. Nationally, more than 60% of homeowners with a mortgage have an interest rate below 4%.
However, we believe supply will loosen up in 2024. Even homeowners who have been locked in to low rates will increasingly find that changing family and financial circumstances will lead to more moves and more new listings over the course of the year, particularly as rates move closer to 6%. More new listings will add to inventory, though overall supply will likely still remain low. This will continue to put upward pressure on home prices.
Between 2019 and 2022, the median home price nationally rose by more than 40%, or by about 13.7% annually, a much faster past of price appreciation than during a typical market. Strong demand during the pandemic, fueled by historically low mortgage rates and increased savings, drove up home prices.
Home price growth moderated in 2023, but still saw higher-than-average increases thanks to persistently low supply in the market. CoreLogic's latest Home Price Insights report shows that prices were up 5.2% year-over-year in November 2023.
Looking ahead, several factors will push and pull at home prices. More inventory will be generally offset by more buyers in the market. As a result, we believe homes prices will rise at a similar pace they did in 2023 at an annual rate of 4.5-5%.
2024 Real Estate Forecast
There were about $1.3 trillion in home purchase loan originations during 2023, despite it being a slow year. And rates have since come down quite a bit from what will likely be the highest point in this cycle.
Considering all those high-rate mortgages that funded over the past two years, we're confident there will be a large pool of homeowners who will benefit from refinancing their current loans and see substantial savings on their monthly payments.
In addition, we might see homeowners tap equity via a cash out refinance if rates keep coming down and get closer to their existing rate.
Home Prices
Lately, there’s been a lot more optimism in the real estate market thanks to easing mortgage rates.Housing inventory hit historic lows during the pandemic and a lack of supply has been a major constraint on the housing market. Supply has continued to remain low largely because of the "rate lock-in" effect.
Many homeowners who likely would have listed their homes for sale decided to stay put last year because of their ultra-low rates. Nationally, more than 60% of homeowners with a mortgage have an interest rate below 4%.
However, we believe supply will loosen up in 2024. Even homeowners who have been locked in to low rates will increasingly find that changing family and financial circumstances will lead to more moves and more new listings over the course of the year, particularly as rates move closer to 6%. More new listings will add to inventory, though overall supply will likely still remain low. This will continue to put upward pressure on home prices.
Between 2019 and 2022, the median home price nationally rose by more than 40%, or by about 13.7% annually, a much faster past of price appreciation than during a typical market. Strong demand during the pandemic, fueled by historically low mortgage rates and increased savings, drove up home prices.
Home price growth moderated in 2023, but still saw higher-than-average increases thanks to persistently low supply in the market. CoreLogic's latest Home Price Insights report shows that prices were up 5.2% year-over-year in November 2023.
Looking ahead, several factors will push and pull at home prices. More inventory will be generally offset by more buyers in the market. As a result, we believe homes prices will rise at a similar pace they did in 2023 at an annual rate of 4.5-5%.
2024 Real Estate Forecast
- Nationwide Appreciation 4.5% to 5%
- Transaction Volume up 15-20%
The Bottom Line
In 2024, we expect mortgage rates to drop closer to 6% in the wake of easing inflationary and less restrictive monetary policy.These lower rates will bring more activity into the market. Demand will continue to overwhelm supply, and we believe we will see low-single digit appreciation throughout the year.
We are confident that the housing market will remain steady in 2024 and beyond, and that real estate will continue to be a safe investment and a great way to build wealth.
If you would like to know if homeownership is a possibility for you this year, fill out the form to request some more information from one of our mortgage advisors. They will be able to answer all your questions about the state of the housing market, and help you put together a plan to get a great deal on a home and start building wealth through home equity when the time is right.
Here at Luminate Home Loans, we’re always looking for ways to offer more value to our clients and partners. That’s why we’re thrilled to announce that we’re now a wholly owned subsidiary of Luminate Bank®—and soon, we’ll officially transition under the Luminate Bank® name.
For years, homebuyers have been hoping for a return to the ultra-low mortgage rates seen during the pandemic. But as we move through 2025, it’s becoming increasingly clear that today’s rates—hovering between 6% and 8%—aren’t going anywhere.
Luminate Bank® Welcomes Josh Eifert as Chief Financial Officer, Honoring Legacy of Dave Turk [Minneapolis, Minn.] – [2/4/2025] – Luminate Bank® is proud to announce the appointment of Josh Eifert as its new Chief Financial Officer, succeeding Dave Turk, who has played a pivotal role in shaping the company's strong financial foundation. Josh brings a wealth of experience and strategic vision to Luminate Bank, with 26 years in the banking industry. Most recently, Josh served as CFO at Tradition Capital Bank in Edina, Minnesota, where he led the financial strategy during its remarkable growth from $300 million to more than $2.5 billion in total assets. Before his tenure as CFO, Josh contributed to Tradition Capital Bank in other key financial roles. He began his career with Norwest and Wells Fargo Banks, gaining extensive expertise in financial and operational capacities. Luminate Bank's leadership transition reflects the company's thoughtful succession planning, ensuring its financial strategies remain robust and forward focused. Under the leadership of Dave Turk, Luminate Bank has built an exceptional financial infrastructure, delivering consistent results and creating a foundation that positions the company for continued success. Luminate Bank's CEO, Marc Campbell, shared his confidence in the appointment: "Josh not only brings exceptional financial acumen and strategic insight to Luminate Bank, but he also embodies the principles that define our organization: integrity, innovation, and a steadfast commitment to excellence," Luminate Bank's CEO, Marc Campbell, shared with confidence. "His leadership will ensure our financial strategies succeed and inspire confidence across all who depend on us." "I am honored to join Luminate Bank at such an exciting time. The company's remarkable history of financial excellence and its forward-thinking approach align perfectly with my values and vision," stated Josh Eifert. "I look forward to collaborating with the talented leadership team to build on this strong foundation and drive continued success for our customers, employees, and stakeholders." Josh graduated from the University of Minnesota with a degree in finance and completed the Graduate School of Banking at Colorado. CEO Marc Campbell expressed gratitude for retiring CFO Dave Turk's contributions, saying, "Dave has been instrumental in positioning Luminate as a financial leader. His dedication, insight, and stewardship will always be a part of our company's legacy." Josh Eifert will officially assume his role on February 18, 2025. About Luminate Bank® At Luminate Bank, We Open Doors—empowering individuals and families to achieve their financial dreams through personalized service and innovative digital solutions. As a nationwide bank headquartered in Minneapolis, Minnesota, we are committed to helping our clients meet their financial goals with a blend of modern technology, traditional values, and the trusted guidance of experienced professionals. Known for our exceptional commitment to customers, we take pride in delivering a seamless, supportive experience for every step of the journey. Our dedicated mortgage division has branches and a team of loan originators across the US, making expert home financing solutions accessible to communities nationwide. Luminate Bank is committed to safeguarding your money and accounts with FDIC insurance coverage up to applicable limits. Learn more about how we can open doors for you at www.luminate.bank , follow us on Instagram, LinkedIn, and Facebook, or call (952) 939-7200. For media inquiries, please contact: Debbie Schwake, CMO debbie.schwake@luminate.bank
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