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High mortgage rate and home prices sidelined many Americans from the housing market in 2023.
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Zillow economists say some conditions may ease in 2024 as more homes are listed for sale.
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The real estate group shared six predictions for next year.
High mortgage rates, low inventory, and elevated home prices have defined the US housing market in 2023.
Those conditions kept many current homeowners from moving, hesitant to give up the lower mortgage rates they secured in prior years, which in turn has left prospective buyers with fewer homes to choose from.
The result has been a frozen housing market. Buyers aren’t buying because sellers aren’t selling, and vice versa. It’s led to stubbornly high prices amid mortgage rates that are high relative to recent history, a cocktail that’s created an affordability crisis in US housing.
However, things may be looking up next year, according to Zillow researchers, and Americans may see some relief as the calendar changes.
Here are six predictions the real estate group has for 2024.
1. Higher for longer interest rates will lead to more homes on the market
As house hunters and current owners come to terms with the new normal of high mortgage rates, Zillow expects more homes to go up for sale as people lose patience waiting for rates to fall before jumping back into the market.
A growing share of reluctant homeowners that haven’t sold homes in the last two years could give in to list their property, which ultimately could lead to greater supply of housing.
2. Home-buying costs will level off
As of October, a typical home buyer would have spent more than 40% of their earnings on a mortgage payment, an all-time high according to Zillow data going back to the 1990s.
Homes may not get less expensive, but the rate of growth could level off and provide Americans some time to catch up via wages and savings.
“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,” Zillow researchers said. “Taken together, the cost of buying a home looks to be on track to level off next year, with the possibility of costs falling if mortgage rates do.”
3. Higher demand for single-family rentals
Zillow expects demand for single-family rentals to ramp up next year as families seek out affordable options.
“One possible path to more single-family rental inventory is homeowners deciding to turn their home into an investment property and rent it out rather than selling it when they move,” researchers said. “The ultralow mortgage rates held by many existing homeowners make it more likely that this option would pencil out.”
4. More markets will follow New York City’s lead
In New York City, demand has jumped for rentals in commutable areas with access to downtown and midtown Manhattan. More distant areas, meanwhile, have seen less demand.
In 2024, Zillow expects more markets across the country to reflect growing rental demand in downtown centers.
“Renters looking for a place near downtown will likely have more options with this year’s multi-family-construction boom, which means a huge number of new homes have hit the market,” the real estate group said.
5. Less competition from flippers
Low housing inventory has been the norm for years, and even as more homes go online next year, total volume will remain below pre-pandemic norms.
Given fewer options, buyers will be willing to overlook small flaws in properties, like an outdated kitchen, and make the purchase anyway.
“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,” Zillow researchers said. “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.”
6. AI comes to the housing industry
Further advancements in artificial intelligence will help streamline the home-shopping and home-selling experience next year, according to Zillow.
New tools will help real estate agents connect with more clients, and large language models like ChatGPT have already helped with writing listings. Zillow’s tech experts expect new AI tools to bolster visual content creation, such as 3D images.
Home shoppers, meanwhile, are set to benefit from generative-AI powered experiences that provide more insights to home financing.
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