Conditions in the real estate market may begin looking up next year as mortgage rates dip and inventory increases, according to a forecast from economists.
In a press release published Tuesday by residential real estate brokerage Redfin, the company said it anticipates mortgage rates to decline to about 7% in the first quarter of next year and then see a decline to about 6.6% by the end of 2024.
The real estate firm also noted that the drop in mortgage rates would lead to an increase in home listings, which has already seen a double-digit annual rise in recent weeks. The increase in inventory would then bring home prices down by at least 1% year-over-year in the second and third quarters of 2024. This will mark the first time home prices have declined since 2012 following the Great Recession.
Conditions are also looking up for home sellers as Redfin expects a total of 4.5 million sales by the last quarter of 2024, up from an annual pace of 3.85 million this year.
Redfin's prediction echoes forecasts from Fannie Mae, which expects mortgage rates to decline gradually between 2024 and 2025, reaching 6.9% for the 30-year fixed term in two years. The firm also anticipates that the slow decline in mortgage rates will lead to a modest rebound in home sales, with experts predicting 4.7 million sales in 2024 and 5.3 million in 2025.
New home sales in the United States dropped to an annual rate of 679,000 in October as mortgage rates were coming off 22-year highs of 8%.
How Will Renters Fare in 2024?
While homebuyers and sellers are expected to have a great outlook next year, the same cannot be said for renters of larger apartments. According to Redfin, rental prices of large units may climb next year and supply will not keep up with the demand.
Having said that, the real estate brokerage predicts that rental prices for smaller units will decrease next year as a backlog of freshly constructed properties is waiting to hit the market.
"Builders, who have focused on building smaller apartment units since around 2019, will start to increase their investment in family-friendly rental units," the brokerage said.
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