Will Housing Prices Drop in 2024?


It’s been a wild ride of late in the property markets, with the pandemic sparking a boom in house prices that so far has largely resisted soaring inflation and rising interest rates. 

That’s made it hard for individuals and families looking to get into a home and for property owners looking to relocate. Will this year open more doors for home buyers and swappers? Let’s take a look at the factors shaping today’s property market to find out.

For Sale Signs: Are House Prices Set to Drop?

If you’ve been waiting to get into the housing market for a while, you may be hoping that 2024 might bring some relief after a topsy-turvy few years that have seen both prices and mortgage rates increase—while the number of homes on the market has stayed stubbornly low.

How bad has it been for would-be buyers? According to the St Louis Fed, U.S. house prices rose more than 40% between the outbreak of the pandemic in 2020 to the middle of 2023. Meanwhile, data from property services group Redfin shows average home prices in Gainesville rose more than 50% from under $200,000 in January 2020 to $300,000 in May 2023.

A slowdown in price growth from the middle of 2022 into 2023 and a slight easing in average 30-year rates later in 2022 gave many would-be buyers hope that the worst of the property price spike was over.

Unfortunately, since then, prices and rates have taken on steam and the trend is expected to continue. The National Association of Realtors reported in October 2023 that it sees average U.S. housing prices rising 5.5% by the end of the third quarter of 2024, while Zillow predicted in September of this year that it expects average U.S. home values to rise 4.3% over the next year.

What’s Keeping Home Prices So High?

That’s bad news for potential home buyers. It’s also surprising, considering that mortgage rates have been high for some time now, in line with higher interest rates introduced by the Federal Reserve to tackle persistent inflation in the wake of the pandemic. Let’s take a closer look at three factors that are continuing to support high prices for houses.

Low Housing Inventory

High mortgage rates also keep would-be sellers off the market, because they would need to purchase their next property at the same higher rates. Many homeowners were also able to lock in very low long-term interest rates in 30-year fixed-rate mortgages.

Fewer houses on the market means more demand for the homes that are available, which is keeping the prices higher. Gainesville is no exception. According to Redfin, the average time on the market for a home in the city dropped from nearly 70 days in 2020 to just over 20 today.

Pandemic Savings

Another factor behind the surprising strength of U.S. home prices has been the extra savings many Americans were able to put away as a result of the payments and tax credits handed out as part of COVID-19 relief measures.

According to the Economist, these extra savings have lasted longer than expected, allowing families to cover costs that might have been unsustainable, remain in their homes, and not be forced to sell due to financial circumstances.

Hermit Homeowners

Another factor cited as supporting higher prices is the changed role that houses have in our homes since the pandemic. Not only do more people work from home these days, they’ve also become used to spending more time there.

Many people have invested in making their homes their haven, spending money on personalized upgrades and gadgets. That trend is likely to continue as buying a new home becomes more expensive, keeping even more houses off the market.

Looking Ahead

What do these changes mean for those of us looking to buy a new home in the near future? Let’s break down some common questions about the housing market in 2024.

Will Mortgage Interest Rates Go Down in 2024?

Stubborn inflation and the persistently higher interest rates adopted to tackle it have surprised many analysts, who expected rates to peak in 2022. Now mortgage underwriter Fannie May expects average 30-year mortgage interest rates to remain near current levels for much of 2024.

Will Housing Sales Decline?

Since there likely won’t be a surge in new listings and would-be buyers will continue to struggle to afford new homes, experts predict that the number of sales in 2024 won’t spike or drop, but will remain about the same as in 2023. 

Will 2024 be a Buyer’s or a Seller’s Market?

With prices set to remain high in most markets, 2024 is widely expected to be another tough one for buyers, with those houses that do come onto the market attracting multiple offers and high prices. Successful sellers will want to put as much of their cash windfall as they can into their new properties since they will now also be exposed to far higher mortgage interest rates.

What Other Economic Factors Affect the Market?

Another worry is that the U.S. market might enter a minor recession in early 2024 as higher interest rates finally start to cool the economy. While this is expected to be a “soft landing” for the economy, it could increase unemployment or affect the take-home pay of some workers.

That might make it difficult for some buyers to jump into the market, even if interest rates do start to come down during the year.

Reasons to be Cheerful

While the current outlook suggests high prices, limited supply, and high interest rates will make it hard for buyers to enter the property market, a number of factors suggest that things will begin to improve and 2025 could be a promising time for would-be homeowners.

  • Inflation slowdown: Recent indicators suggest the stubborn post-pandemic inflation is finally getting under control.  
  • Lower rates: With the Federal Reserve likely to slow down interest rate increases or even cut rates, lower mortgage rates will eventually begin to feed through to borrowers.
  • Savings slump: The savings that have allowed some owners to stay in unaffordable homes are expected to start running out, forcing more houses on the market.
  • Refinance time: More shorter-term or adjustable rate mortgages will reset or need to be refinanced at higher rates, forcing more people to put unaffordable homes on the market. 
  • Economic growth: Long-term economic indicators in the U.S. are good. After the expected slowdown early next year, lower rates, inflation, and other factors are expected to drive growth, putting more money into the hands of potential homebuyers.

The Local Factor

Most importantly, many commentators note that there is a lot of variability built into the forecasts for 2024. Many local markets will see housing prices drop as an ever-increasing amount of new-build inventory comes on the market.

Home buyers are also getting smart about where they buy. While prices are likely to remain high and inventory is expected to remain in short supply in crowded cities on the east and west coasts, many cities in the south are attracting homebuyers looking for better value.

Those factors have made Gainesville a particularly attractive destination in recent years for newcomers looking for affordable housing, good jobs, and great college town vibes (especially on game day!). That’s helped make our city the ninth-fastest-growing U.S. metro region over the last five years, according to the U.S. Census Bureau

Should You Buy a House in 2024?

In general, it’s going to be about as tough to buy a house in 2024 as it’s been in 2023. Nationwide, average property prices are expected to remain high and houses are expected to be in short supply. It will take a while for lower mortgage rates to filter through as well, even as inflation falls.

That said, it’s crucial to look at your local market, as more and more communities diverge from the post-pandemic macro-trends that have defined the last three years. Fast-growing local economies and increasing housing stock are putting cities like Gainesville ahead of the curve.

Keep It Local: The Best Mortgages Are Close to Home

It also pays to be ahead of the pack when it comes to home financing. Nimble local lenders like Radiant Credit Union have lower overheads and members, not shareholders to answer to. That often allows us to offer lower rates and better terms than many of our competitors. 

And, with deep roots in the Gainesville community, we can offer years of local market knowledge and a personal touch to every loan we approve. We also offer a range of features designed to help our members succeed in today’s competitive housing market, including:

  • 60-day rate lock on pre-approved loans
  • Flexible loan terms from 10-30 years
  • Down payments as low as 5% of purchase price
  • Single-family loans up to $1 million

Contact us today to find out more about our easy online loan application process and rapid pre-approvals or click below for more valuable tips for buying a home in Florida.