Home Prices To Drop 1.7% In 2024–'Not Enough,' Realtor Says In New Prediction Report

The housing market, which has been grappling with affordability challenges not seen since the early 1980s, may begin to ease later this year – but not enough to make a real impact for most buyers, according to a new forecast from Realtor.com.

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The real estate listings site predicts a modest 1.7% decline in home prices this year, a move that chief economist Danielle Hale describes as “a baby step in the right direction.” The decrease, while welcome news for potential buyers, is "not enough" and is unlikely to offset the steep price increases of recent years or the impact of elevated mortgage rates.

“We’re not going to see a major breakthrough in the logjam that has been the housing market over the last year or so,” Hale was quoted in the report. “It’s going to stop getting worse.”

The Realtor forecast points to a market that remains challenging for buyers, with high prices, still-elevated mortgage rates, and a persistent shortage of available homes.

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On the mortgage front, Realtor.com predicts that rates will retreat from current levels, averaging 6.8% for the year and potentially falling to around 6.5% by year-end. While that would be an improvement from recent highs above 7%, it is well above the 4% historical average between 2013 and 2019.

However, the slight dip in prices and rates could offer some psychological relief to buyers who have felt priced out of the market. “It’s going to be a big leap forward for buyers’ mental health. Some of the pressure and sense of urgency will start to let up,” Hale said.

Still, affordability will remain stretched. Buyers making the national median income in 2024 are expected to spend an average of 34.9% of their earnings on housing payments, Realtor.com noted, down from a peak of 39% in October 2023 but still far above the 21% average from 2016 to 2019.

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Perhaps most challenging for buyers will be the continued scarcity of homes for sale. Realtor.com predicts the number of existing homes on the market will fall by 14% this year. The shortage is largely driven by what economists call the “lock-in effect” – homeowners with low mortgage rates are reluctant to sell and take on higher-rate loans for new purchases.

“We’re talking about moves of necessity for people,” Hale explained, referring to life changes like new jobs, growing families, or retirement that might prompt a move despite unfavorable market conditions.

The forecast isn’t all gloomy. New home construction is expected to increase slightly by about 0.4%, potentially offering more options for buyers considering newly built homes. Additionally, the rental market may provide some relief, with Realtor.com predicting a 0.2% decrease in rents for 2024.

As the market adjusts to higher interest rates and evolving economic conditions, later this year may offer relative stability – if not the shift many hopeful buyers have been awaiting. 

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