Housing market predictions 2024: What homebuyers should know (2024)

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• In 2024, homebuyers can expect high home prices and slightly lower mortgage rates later in the year.
• Hopeful buyers should start preparing as early as possible by saving money and improving their credit.
• Look into affordable mortgage programs and down payment assistance to boost affordability.

After watching mortgage rates hit two-decade highs and inventory plummet last year, many hopeful homebuyers are eager to get off the sidelines and into a home.

While housing market conditions may ease somewhat this year, a lot of buyers are still going to struggle to find affordability. If you're planning to buy a house this year, here's what you need to know about housing market predictions in 2024, and how you can prepare.

Home price predictions 2024

Experts generally expect home prices to increase throughout 2024.

• Fannie Mae currently sees home prices rising 4.8% year over year by the end of 2024
• The Mortgage Bankers Association believes prices could rise as much as 4.3% this year
• The National Association of Realtors has more conservative expectations and thinks existing-home prices will inch up just under 2% overall by the end of 2024.

Low home inventory is a chronic problem in the US. This has generally kept home prices up, even as mortgage rates peaked near 8% and homebuying demand plummeted last year. Demand may increase if rates go down in the second half of 2024, so even if home prices were to drop in 2024, they likely wouldn't fall enough to significantly improve affordability on their own.

Mortgage rate predictions 2024

Though they're still relatively high, experts generally predict we'll see mortgage rates go down a little bit this year. The average 30-year fixed mortgage rate could end up in the 6.5% to 7% range.

• Fannie Mae thinks rates could end the year around 7%
• The MBA believes 30-year fixed rates could reach 6.5% by the end of 2024
• NAR predicts rates will peak this quarter at 7.1% and drop to 6.5% in the last quarter of the year

Whether mortgage rates actually trend down in 2024, and by how much, depends in part on the path the Federal Reserve takes in its fight against inflation.

The Fed has indicated that it may start cutting the federal funds rate this year, which would remove a lot of upward pressure off of mortgage rates and allow them to fall more substantially. But inflation has remained higher than expected in recent months, so we might have to wait until the fall for a Fed rate cut. This means mortgage rates will likely remain elevated in the near term.

How likely is a housing market crash in 2024?

Because home prices have increased so dramatically in recent years, doomsayers believe that the housing market is in a bubble, and it's only a matter of time before it bursts and the market crashes. But it's actually pretty unlikely that will happen.

One of the main reasons we're unlikely to see the housing market crash in 2024 has to do with housing inventory. The US simply does not have enough homes to meet demand, which is keeping prices steady.

Of course, no one has a crystal ball. If demand were to plummet, home prices could start falling. A severe recession could cause this to happen, for example. But even with a recession,it's not a given that the housing market would crash as a result.

What this means for 2024 homebuyers

If rates drop later this year, it will undoubtedly improve affordability for borrowers, but with that will come increased demand. This will keep home prices high and likely push them up even further. Finding a home in your price range may become even trickier, and you may need to make a lot of offers on homes before you get one accepted.

How to prepare to buy a house in 2024: 5 tips

Here's what you should be doing to prepare for homeownership in 2024.

1. Get your finances ready

Because home prices are likely to remain high and mortgage rates may not come down until later this year or next year, you'll want to make sure you get the lowest rate you can.

One of the faster methods to get your credit score up is to lower your credit utilization. This will also decrease your debt-to-income ratio, which is another factor mortgage lenders look at when considering what rate to give you.

J.R. Russell, head of direct to consumer mortgage lending at Citi Mortgages, says homebuyers should consider paying off credit card balances to improve their scores ahead of the 2024 homebuying season.

"If you're trying to pay off or pay down some credit cards, start with the cards or credit lines with the highest interest rates first," Russell says. "Then, pay off the balances that are smallest. The good news is that if you do this, you'll improve your debt load and your credit score."

2. Look for affordable mortgages and other first-time homebuyer assistance

The key to affording homeownership for many buyers in 2024 will be utilizingmortgages geared toward first-time homebuyers and combining them with grants or other forms of down payment assistance.

"If you're not sure that your down payment will be sufficient, take time to understand all of the available products that you may be eligible for through the FHA or VA, your bank, or other local institutions," Russell says. "These programs may grant you access to down payment assistance and low-to-moderate income programs, among other game-changing resources."

Conventional loans allow down payments as low as 3%, while FHA loans allow 3.5% down payments. USDA and VA loans allow no down payment.

Look into lenders that offer special mortgage programs that come with additional assistance. Rocket Mortgage, for example, offers a ONE+ mortgage that allows borrowers to put down just 1%, with the lender providing a 2% grant.

Bank of America mortgages, another popular lender for first-time buyers, offers a couple of different forms of down payment assistance.

3. Time your purchase right

There probably won't be a single "best time" to buy in 2024, because that depends on each buyer's priorities — so it's important that you figure out yours.

If getting the lowest rate possible is most important to you, you'll want to wait until later this year to buy, or possibly even wait until 2025. Buying in the spring or summer will give you more inventory to choose from, but you'll also likely be up against greater competition since it's the peak buying season.

4. But don't rush

"If rates do start to moderate and the market does seem to become more favorable to buying in 2024, it will likely stay this way for a while," Russell says. "If that's the case, I encourage you to take your time! Don't put pressure on yourself to make any potentially hasty decisions on what may be your biggest asset and the largest financial decision of your life."

Though it's still a while away, forecasts generally expect mortgage rates to fall throughout 2025. If you don't feel ready to buy this year, there's nothing wrong with waiting a bit to continue saving and working on your credit.

5. Build your savings

Whether you're padding your mortgage down payment savings or contributing to your emergency fund, tucking away some extra cash now is vital if you plan on buying a home soon.

When you buy a house, you'll need enough cash to cover both your down payment and closing costs, which can amount to between 3% and 6% of the loan amount. While many mortgage programs allow low down payments, the more you can put down, the better your interest rate will likely be. Plus, offers with larger down payments are often more attractive to home sellers, giving you a competitive edge in what will likely be a tough market.

Homeownership is also often more expensive than many first-time buyers realize, especially in the first year. Having some extra money set aside for unexpected costs will help ensure you don't go into debt when your first big housing expense comes along.

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