Redfin Anticipates Multiple U.S. Housing Market Trends for 2024
Redfin, a prominent national real estate brokerage, forecasts significant shifts towards a buyer’s market in 2024. These projections come as pandemic-induced inflation gradually recedes, mortgage rates decline, and more homeowners decide to list their properties for sale.
Chief Economist Daryl Fairweather’s annual end-of-year predictions suggest that 2024 could mark a turning point, offering renewed hope for prospective homebuyers across the United States.
In addition to the shift towards a buyer’s market, Redfin anticipates further positive changes in the home buying and selling process, aimed at enhancing consumer experience and accessibility.
Forecast 1: Anticipated 1% Decline in Home Prices
According to Redfin’s projections, there will be a 1% year-over-year decrease in home prices during the second and third quarters, coinciding with the peak home-selling season.
This expected decline would signify the first price drop since 2012, excluding a brief period observed in the first half of 2023, amidst the post-Great Recession recovery phase.
This adjustment presents a favorable shift for potential homebuyers. Throughout 2023, home prices have been on the rise, with an approximate 3% increase year over year.
Despite the slight decline, home affordability remains a challenge, with the typical homebuyer’s monthly payment hovering close to its historical peak. Nonetheless, any alleviation in the ongoing affordability crisis would be a welcomed development for many aspiring homeowners.
Forecast 2: Increase in New Listings Expected
Redfin’s second prediction revolves around an anticipated uptick in new listings, contributing to a decline in home prices due to a surplus in supply compared to demand.
Recent data from Redfin reveals a noteworthy annual surge in homeowners reaching out to Redfin for assistance in selling their homes, coupled with a slight decline in inquiries from potential buyers.
This surge in listings is expected to stem from the easing of the mortgage-rate lock-in effect, prompting many homeowners to capitalize on their equity gains and list their properties for sale.
With the majority of mortgaged homeowners already locked into lower mortgage rates, the prevailing sentiment is a realization that rates are unlikely to return to the historically low levels seen in previous years.
Consequently, sellers, particularly in regions such as South Florida where prices have seen significant appreciation, are opting to cash in on their equity and relocate to more affordable locales.
Forecast 3: Surge in Home Sales Anticipated, Ending the Year with a 5% Increase
Redfin’s third prediction centers on a significant surge in home sales throughout 2024, culminating in a 5% year-over-year increase by the year’s end. The trajectory is expected to commence with existing home sales poised for a total of 4.1 million in the first quarter, reflecting an upturn from the fourth quarter of 2023, which saw an annual pace of 3.85 million.
The momentum in home sales is projected to intensify progressively over the course of the year. By the fourth quarter, sales are forecasted to reach a pace of 4.5 million, propelled by improving affordability conditions and an influx of new listings onto the market.
Overall, Redfin’s outlook for 2024 encompasses an estimated total of 4.3 million home sales, highlighting a pivotal contrast from the previous year. Unlike 2023, where sales momentum waned, 2024 is anticipated to witness a steady acceleration in sales activity as the year progresses.
Forecast 4: Mortgage Rates Expected to Decline Steadily, Yet Remain Above 6%
Redfin’s fourth prediction revolves around the trajectory of mortgage rates, forecasting a gradual decline throughout 2024 while remaining above the 6% threshold.
In the initial quarter, Redfin anticipates the average 30-year mortgage rate to plateau at 7%, gradually tapering off as the year progresses. By the conclusion of 2024, mortgage rates are projected to hover around 6.6%.
This downward trend in rates, coupled with a slight decrease in home prices, is poised to provide some relief to prospective homebuyers.
Despite the anticipated decline, mortgage rates are expected to remain considerably higher than the record lows observed during the pandemic era. This is attributed to the prevailing belief in financial markets that the economy will steer clear of a recession in 2024.
While inflation is being managed effectively, the Federal Reserve is anticipated to maintain interest rates at their current level initially. However, come summer, the Fed may enact two or three rate cuts, consequently driving mortgage rates downward as the year unfolds.
Prediction 5: Revolutionizing the Real Estate Industry
The real estate sector, historically resistant to change, is undergoing a rapid transformation that is set to escalate in 2024. In a groundbreaking shift, Redfin’s agents observed widespread discounting among competitors in 2023, marking a significant departure from the industry’s traditional practices.
This discounting was evident not only in publicly offered fees to buyers’ agents but also in commission refunds and private listing agreements. With newspapers and real estate portals increasingly disclosing information about commissions, homebuyers in 2024 are expected to become more discerning about agent costs and less hesitant to negotiate commissions.
Furthermore, there is a growing trend of homebuyers opting to work directly with the listing agent instead of hiring their own representative. While this practice has long been prevalent when the listing agent is affiliated with a builder, the current scarcity of inventory and heightened competition among agents have expanded this approach to include more re-sales. This shift often results in considerable savings for buyers, as they avoid the additional costs associated with engaging a second agent.
The prospect of potential legal action is poised to further accelerate this trend in 2024. The U.S. Department of Justice is contemplating whether listing agents should participate in determining the fee paid to a buyer’s agent.
While the possibility of a DoJ lawsuit may take years to materialize and could ultimately remain unresolved, brokerages are already bracing themselves for a future where a single agent earns the majority, if not all, of the fees from a sale.
These transformative changes, long advocated by Redfin, are anticipated to benefit consumers significantly. They will afford consumers greater flexibility in choosing which services to avail and the freedom to negotiate costs according to their preferences.
Prediction 6: Shifting Perceptions: The Rise of Renting
In 2024, renting will shed its traditional stigma as more young families opt for the rental lifestyle. A growing demand for spacious rental apartments and houses is anticipated, reflecting a broader cultural shift where renting is increasingly viewed as a viable long-term housing solution. This trend is particularly evident among millennials, with nearly one in five expressing doubts about ever owning a home, according to a 2023 housing survey. For many, the decision to rent is driven by financial constraints, with almost half citing unaffordable housing prices and an inability to save for a down payment.
However, beyond financial considerations, there is a notable segment of renters who actively choose the rental lifestyle. A significant proportion of respondents cited a lack of interest in homeownership or a preference to avoid the responsibilities associated with homeownership, such as maintenance.
With skyrocketing home prices, the financial incentives of homeownership for young millennials and Gen Zers are diminishing. Instead of investing in homeownership expenses like agent fees, loan interest, property taxes, and maintenance, many are turning to renting and reallocating their resources into alternative investment avenues.
In response to this shifting demand landscape, Redfin predicts a surge in prices for large rental units, driven by a supply-demand imbalance. However, the opposite trend is expected for smaller rental properties, where an oversupply situation will exert downward pressure on prices. Builders, attuned to market dynamics, are poised to pivot towards constructing more family-friendly rental units, marking a departure from the trend of smaller apartment unit development observed since 2019.
In 2024, renting will shed its traditional stigma as more young families opt for the rental lifestyle. A growing demand for spacious rental apartments and houses is anticipated, reflecting a broader cultural shift where renting is increasingly viewed as a viable long-term housing solution. This trend is particularly evident among millennials, with nearly one in five expressing doubts about ever owning a home, according to a 2023 housing survey. For many, the decision to rent is driven by financial constraints, with almost half citing unaffordable housing prices and an inability to save for a down payment.
However, beyond financial considerations, there is a notable segment of renters who actively choose the rental lifestyle. A significant proportion of respondents cited a lack of interest in homeownership or a preference to avoid the responsibilities associated with homeownership, such as maintenance.
With skyrocketing home prices, the financial incentives of homeownership for young millennials and Gen Zers are diminishing. Instead of investing in homeownership expenses like agent fees, loan interest, property taxes, and maintenance, many are turning to renting and reallocating their resources into alternative investment avenues.
In response to this shifting demand landscape, Redfin predicts a surge in prices for large rental units, driven by a supply-demand imbalance. However, the opposite trend is expected for smaller rental properties, where an oversupply situation will exert downward pressure on prices. Builders, attuned to market dynamics, are poised to pivot towards constructing more family-friendly rental units, marking a departure from the trend of smaller apartment unit development observed since 2019.
Prediction 7: Housing Woes Loom Over Biden’s Re-Election Prospects
Since President Biden assumed office, home prices have surged by more than 20%, posing a significant challenge to his re-election bid. A recent poll revealed that 65% of voters disapprove of Biden’s economic management, with housing affordability emerging as a primary concern. Despite a robust overall economy, soaring housing costs have left many Americans feeling financially strained, particularly younger demographics yet to enter homeownership. Even as affordability gradually improves in 2024, the financial repercussions will linger for Gen Z and millennial voters, impacting their economic outlook for the foreseeable future.
In response to mounting concerns, both President Biden and his political adversaries are expected to unveil ambitious housing policy proposals to court disgruntled voters dissatisfied with their economic circumstances. Democrats are poised to prioritize initiatives such as subsidizing first-time homebuyers’ down payments, advocating for inclusionary zoning, and allocating funds for housing vouchers, all of which resonate with liberal constituents. Conversely, Republicans are likely to concentrate on deregulatory measures aimed at fostering development.
Beyond the political arena, significant shifts are anticipated in the housing landscape for 2024:
Price Dynamics in Various Metro Areas: Coastal Florida markets like North Port and Cape Coral are forecasted to witness substantial price declines, partly due to inflated pandemic-era surges and escalating climate-related risks, which diminish desirability and elevate home insurance costs. Conversely, affordable and climate-resilient metros such as Albany, NY, Rochester, NY, and Grand Rapids, MI, are projected to experience price upticks.
Boomerang Migration: A trend of boomerang migration is expected, with remote workers who relocated from expensive urban hubs to more affordable locales during the pandemic returning to their original cities due to shifting in-office policies and escalating climate risks, as evidenced by tech employees moving back to Seattle from Boise, ID.
Multigenerational Households: Many financially strained young Americans, unable to afford standalone housing, will opt to reside with their boomer parents, leading to a rise in multigenerational households and reshaping housing demographics.
Local Government Initiatives: Local governments are anticipated to adopt innovative measures to enhance housing affordability, including the implementation of land-value taxes to incentivize construction and facilitate affordable homeownership. Congressional candidates are expected to emulate successful policies enacted in progressive cities and states like Minneapolis, Oregon, and California, which have embraced inclusive zoning reforms.
Federal Intervention: The U.S. government may play a more active role in stimulating housing construction by providing financial incentives and encouraging cities and states to bolster housing development efforts.
