Many homebuyers and sellers are eager to know if home prices will drop in 2024. The shifting market has everyone wondering how it will affect them.
We may be in the midst of a housing market correction. Keep reading to find out why experts anticipate minimal home price drops in 2024.
According to the data—are home prices dropping?
Reading newspaper headlines can often create a more dramatic impression of the housing market than what’s really happening.
If you had to guess how much median US housing prices have changed between December 2022 and December 2023, what would your number be? Would you predict a decrease, considering rising interest rates?
…in reality, home prices increased by 4% in that time frame, as reported by Redfin. However, this could change as we progress into 2024. It’s important to note that this data is national—smaller, local markets may experience different price fluctuations. Despite a notable 0.5% rise in mortgage rates, the overall price went up.
This increase all boils down to one major theme: supply and demand.
A major reason for this situation is the decrease in the number of homes on the market. With the rise in mortgage rates, homeowners with low rates were less motivated to sell. When you’re locked in at 4%, buying a new house at 7% is a tough pill to swallow. Compared to last year, the number of homes on the market went down by 6.1%. This significant decrease in inventory has helped to keep prices high. As a result, serious buyers have to make competitive offers because they are competing for a limited number of available homes.
Unless the mortgage rate increases—or until sellers grow impatient—a substantial price drop is unlikely. Ultimately, there will always be individuals whose eagerness—or need—to buy a home outweighs market conditions. These people are willing to stretch their budget to secure a home rather than giving up on homeownership.
Data via Redfin: change in home price between early 2021-late 2023
Will buyers find relief in 2024?
Though we’re already at the end of January, we haven’t quite hit the spring market yet. Considering the spring market is a popular time for buyers to get serious about their search, many are left wondering—will 2024 be better than previous years?
Many industry experts anticipate that prices will likely be on par with 2023, with the possibility of minor adjustments. However, no one has a crystal ball—and the market’s trajectory will largely hinge on the interest rate.
If the interest rate were to drop rapidly, more buyers would be able to enter the market—which would likely inflate home prices again. Last year, the Fed was working to curb inflation—which they do by maintaining a high interest rate. Although rates have been gradually decreasing, homebuyers shouldn’t hold their breath for the extreme lows of 2021.
One piece of good news: BrightMLS is predicting in inventory increase of approximately 8% in 2024.
A correction, not a crash
Most experts would consider a housing market correction to be a price drop of 10% or less.
Real estate experts are pretty much in agreement that the overall average price drop will be less than 10% before stabilizing—or rising again. With that in mind, it’s more accurate to call the current market fluctuations a correction instead of a crash.
It’s not hard to see why prices may be “correcting”—in the past 5 years, average US home prices went up approximately $120,500! Keeping that in mind, a minor drop in home prices won’t get us anywhere near pre-pandemic levels.
To set expectations for what potential market corrections could mean, consider reviewing home sale prices in your desired neighborhood from early 2020. This can provide insight into pre-pandemic demand levels before the onset of historically low rates. By doing so, you can gauge a possible floor for prices during this correction period.
Are housing prices dropping in 2024?
It’s natural to be curious about what’s happening with the market in 2024—especially if you’re planning to buy or sell. Some expert advice to consider:
- Home prices and mortgage rates are predicted to see a small drop, according to Redfin. Pairing this prediction with the anticipated inventory increase should bring at least some relief for exhausted buyers.
- BrightMLS is calling for similar home prices to 2023. Considering the average home price went up around 13.7% each year between 2019 and 2022, this should be very welcome news.
- Realtor.com is predicting a small price drop as well, with their estimate being a drop of less than 2%.
As a reminder, homes have historically always appreciated in value in the long-term.
Is buying a house in 2024 the right move?
2024 is not necessarily a bad year to purchase, especially if your lifestyle calls for a move. If you’re planning to live there for a while and it’s within your budget, you do have some factors working in your favor.
Does the market finally favor buyers? Not completely—however, it does have the potential to be the closest to a balanced market since pre-pandemic days.
In better news, home prices are expected to remain stable, with minimal decreases and no significant increases. Although interest rates are still relatively high, they are starting to back off from their peak in 2023. As a result, some homebuyers may hold off in anticipation of further decreases, leading to reduced competition for available homes.
Resource: what’s the real difference between a 6.0% and 6.5% rate, and how does refinancing come into play.
As always, owning (rather than renting) allows you to start building your own equity—instead of your landlord’s. Depending on the mortgage rate, paying rent is often more expensive than a monthly mortgage payment—and you can always aim to refinance in the future.
Is there a disadvantage to waiting?
If the future could bring lower home prices and better interest rates, it may seem sensible to wait. For certain buyers, postponing may be the best option.
Nevertheless, it’s crucial to weigh the potential pros and cons.
While a house is a great opportunity to build equity, it’s (more importantly) your sanctuary. If your life calls for a change—whether that’s a growing family, becoming an empty nester, getting married, getting divorced, or a new job—waiting will likely do more harm than good. It’s important to consider if saving a few thousand on a home—or getting a slightly lower mortgage rate—is worth the wait.