The housing market’s headline news this year has been the affordability challenge brought on by mortgage rates reaching 20-year highs. Looking ahead to 2024, Zillow predicts homebuyers will have a bit more breathing room — but only a bit.
Many who buy will turn to homes that need some work, according to Zillow’s predictions, and do-it-yourself upgrades and repairs will keep new homeowners busy.
“I expect the beginning of a long healing process to kick off in the housing market next year,” Skylar Olsen, Zillow chief economist, said in a release. “We know there are a huge number of households in prime homebuying ages waiting for the winds to turn in their favor. While still presenting challenges, the market will be better for buyers, with more homes to choose from and improved affordability. … This is our breather year.”
“Higher for longer” is the key refrain regarding mortgage rates as Zillow economists look ahead to the next year in housing. It’s becoming clear that high mortgage rates have some staying power. Zillow economists expect more homeowners who locked in long-term payments when rates were near all-time lows to list their homes for sale, as they grow weary of waiting for the historically low rates of 2021 to return.
A very small pool of homes for sale has kept competition fairly stiff for most of this year, even with high costs limiting the number of shoppers. With mortgage rates rising over the past two years, homeowners have been reluctant to sell, opting instead to hold onto the ultralow interest rate on their current mortgage. Many of those homeowners will have their eye on a home with a bigger backyard, an extra bedroom or in their preferred neighborhood across town, and Zillow predicts more of these homeowners will end their holdout for lower rates and go ahead with those moves.
More homes on the market would be good news for buyers, spreading demand and slowing price growth.
A typical homebuyer in October would have spent more than 40 percent of their earnings on their mortgage payment — an all-time high according to Zillow data, which stretches back to the 1990s. While affordability will undoubtedly remain the top concern for potential homebuyers in 2024, there is reason to expect those challenges to ease just a bit.
Zillow’s latest forecast calls for home values to hold steady in 2024. Predicting how mortgage rates will move is a nearly impossible task, but recent inflation news gives the impression that rates are likely to hold fairly steady as well in the coming months.
The cost of buying a home looks likely to level off next year, with the possibility of costs falling if mortgage rates do. That would give time for wages and buyers’ savings to grow — welcome news after the rapid rise in housing costs over the past two years.
Typically the target of home flippers, homes that need a little work before they qualify for “dream home” status will see increased interest from buyers looking to move in.
Inventory has been far below normal for a while, and although Zillow economists predict more homes will hit the market in 2024, inventory will remain much lower than pre-pandemic norms. Faced with limited choices, buyers will be willing to overlook small flaws, such as an outdated bathroom or kitchen.
The higher cost of buying a home today makes a flip harder to pencil out, so buyers may face less competition from flippers than they might have in previous years. Even with less chance of being subject to a bidding war, these homes won’t come cheap, so expect buyers to frequent their local hardware stores as they work on DIY home improvements. If Zillow’s 2024 home trends to watch are any indication, expect brutalist-inspired features and sensory gardens to be on home improvement to-do lists, but not “cloffices” or Tuscan kitchen designs.
Generative AI made waves this year, and Zillow expects AI advancements to streamline the home-shopping and home-selling journey in 2024, improving the experience of buyers, sellers and their agents.
Zillow tech experts expect a variety of new tools and technologies designed for real estate agents next year, allowing them more time to connect with more clients and prioritize face-to-face interactions. Agents have been using AI to assist with writing listing descriptions and to create 3D content for their listings. Next year’s advancements are expected to focus on visual and multimodal capabilities, including more rich media content.
Expect home shoppers to also benefit from generative-AI-powered experiences to glean valuable insights and guidance on home financing.