According to a recent report published by Redfin, home prices are projected to decline in 2024 due to a shift in the balance between buyers and sellers. The report estimates a 1% drop in prices during the second and third quarters, which are traditionally popular times for home buying. However, prices are expected to remain flat in the first and fourth quarters. This decline would mark the first since 2012, excluding a brief period earlier this year.
One of the major factors contributing to this projected decline is the increase in the number of homes available for sale. As home supply surpasses demand, prices are expected to fall, according to Redfin.
Throughout this year, the housing market has been constrained by a lack of available homes for sale. The National Association of Realtors has reported inventories that are less than half of the average seen before the pandemic. One reason for this shortage is the mortgage rate lock-in effect, as homeowners with exceptionally low mortgage rates have been reluctant to sell while rates have increased from historic lows.
However, as mortgage rates remain at a recent average of 7.22%, significantly higher than the 3.5% rate held by the average mortgage holder, homeowners may begin to adjust to the reality of higher rates and consider putting their homes on the market.
“We’ve noticed an increase in homeowners reaching out to Redfin for assistance in selling their homes, accompanied by a slight decrease in requests from prospective buyers,” stated Redfin chief economist Daryl Fairweather.
It is worth noting that while national prices are predicted to remain relatively flat in 2024, the real estate market is highly localized. Redfin expects that regional migration trends driven by return-to-office policies, vulnerability to climate-related damage, and affordability will cause fluctuations in home prices across different areas.
In summary, Redfin’s report suggests that home prices will fall in 2024 due to an increase in the number of homes for sale, shifting the balance between buyers and sellers. Although national prices may remain steady, localized factors will likely influence regional trends in the housing market.
Redfin Predicts Significant Price Fall in Coastal Florida
Redfin, a real estate brokerage firm, has forecasted a significant decline in housing prices in coastal Florida. This pullback comes in the wake of a surge in prices during the pandemic, as well as a decrease in demand due to concerns about climate risks and rising insurance costs.
However, while Florida may experience a downturn, other regions such as Albany, Rochester, and Grand Rapids are expected to see an increase in prices. These areas are becoming popular among buyers seeking affordable homes with lower climate risks.
Return of Remote Workers and Reversal of Migration Trends
Apart from price fluctuations, Redfin also predicts a reversal of the remote work-driven migration that occurred during the pandemic. Many tech workers who had relocated to cities like Boise are expected to return to job centers like Seattle as employers recall employees back to the office. This phenomenon, known as “boomerang migration,” will likely shape the real estate market in the coming year.
Mortgage Rates on the Decline
Redfin expects mortgage rates to continue their downward trend, albeit not reaching the historically low levels witnessed during the early stages of the pandemic. The company projects rates to reach 6.6% by the end of next year. This anticipated decrease in rates is attributed to the Federal Reserve’s plan to keep interest rates steady in the beginning of the year, followed by potential rate cuts from summer onward.
It is worth noting that another projection by Realtor.com suggests mortgage rates will fall further in 2024. While this may tempt some buyers to postpone their purchases in hopes of securing better deals, Redfin cautions that falling prices and rates might not have a significant impact on home affordability.
Positive Outlook for Home Sales
Despite affordability concerns, Redfin expects home sales to increase by 5% compared to the previous year in 2024. The pace of sales is anticipated to accelerate throughout the year.
While housing prices may fluctuate in various regions, Redfin’s insights and projections provide valuable guidance for both buyers and sellers navigating the dynamic real estate market.
