Redfin has made several real estate predictions for 2024. They start by predicting that home prices will fall 1% year over year in the second and third quarters. Home prices will fall as supply increases. This compares closely to the National Association of Realtor’s prediction that values will mostly be unchanged in 2024, except in California which will see values decline.
Redfin also predicts that new listings will increase. They believe that sellers will realize that we will not see low interest rates again anytime soon so they should sell before prices fall, even if they currently have a low interest rate. They similarly predict that sales of existing homes will increase as inventory increases. They predict that mortgage interest rates will linger at 7% in the first quarter then decline throughout the rest of the year to about 6.6% by the end of the year. Of course, rates vary depending on the number of points purchased and the term of the loan. Those who believe rates will fall in a year or two may prefer to take out an adjustable rate loan to score a lower starting interest rate.
They also predict that renting will lose its stigma, as one in five millennials believe they will never own a home. When prices are as high as they are currently, it is cheaper to rent than own, in monthly terms, in most cities. They predict that the housing problem could hurt Biden. 65% of voters disapprove of his handling of the economy, and the increased cost of housing is a factor in that.
They also expect big price declines in coastal Florida, in places like Cape Coral, where prices surged during the pandemic. Some people will need to return to the office and others will be affected by the increasing risk of hurricanes, which makes home insurance more expensive. They expect prices to rise in affordable metros that are hurricane resistant, such as Albany and Rochester, NY, and Grand Rapids, MI. I personally would not buy in New York state due to high property taxes, high state income taxes, old construction, cold weather, and strongly pro-tenant landlord-tenant laws. They believe that some people who fled expensive cities for more affordable cities will return; e.g., to Seattle from Boise. That makes sense and is probably already happening.
They also expect governments to enact legislation to promote building. They expect changes in zoning to increase density, such as the legislation we have seen in Washington State. Of course, zoning laws are a small component in housing affordability compared to interest rates, ease in obtaining building permits, and return on investment in building rental properties versus simply collecting 5+% interest without any eviction costs, repair costs, risk of squatters, risk of running afoul of increasingly complex and slanted landlord-tenant laws, etc.