- The housing market will see a stronger and longer spring home-buying rush this year, real estate professionals say.
- The seasonal buying frenzy could lead to price increases of up to 5%, Redfin predicted.
- Buyers and sellers are slowly returning to the market as mortgage rates are lower.
The housing market is poised to surge with a stronger-than-usual spring home-buying rush — one that could lead to higher home prices through the end of 2024, real estate experts say.
This is not what economists had initially expected for the housing market this year. Redfin previously forecast prices would remain mostly flat, forecasting a slight 1% decline in December.
But there is much more upside now, Redfin chief economist Daryl Fairweather said, basing her updated forecast on signs that the spring buying season is likely to be much stronger than last year.
A strong spring home-buying rush — which typically begins in early March and begins to taper off in the back half of summer — could push home prices up as much as 5% by the end of the year, Fairweather estimated. Home sales could also increase by 5% by the end of the year, she said.
Skylar Olsen, Zillow’s chief economist, estimates a similar increase in home prices and sales, thanks to a spring housing boom that is likely to be stronger and longer than last year. Olsen thinks prices could rise 3.6% by the end of the year as buyer interest picks up, while home sales calculated by Zillow remain relatively steady.
Some of that buying interest was already evident when mortgage rates fell lower late last year, Olsen says. In December, Zillow saw an increase in home search interest as well as increased interest in home showings.
Redfin real estate agents are also starting to see an increase in buyer interest. More buyers have been shopping around but waiting to pull the trigger on a home, Fairweather added — another possible sign that the spring months will see a bigger boost this year than usual.
“I think we’ve hit rock bottom and the only way to go from here is up,” Fairweather said.
Lower rates are melting the market
A burst of activity this spring would mark a change from an anemic 2023, when the housing market was stuck in low gear by high interest rates, which created a “lock-in” effect that held back both buyers and sellers. .
This dynamic has begun to change with the lowering of mortgage rates. Rates have fallen from a peak of about 8% reached in October to about 6.6% last week, according to Freddie Mac data.
That’s been a big incentive for potential buyers to get back into the market, Fairweather said — a key reason why the housing market is expected to be stronger this year.
Meanwhile, more homeowners are beginning to realize they can no longer wait for mortgage rates to fall, Fairweather added. Borrowing costs aren’t returning to pandemic-era lows anytime soon, and many would-be sellers are being forced to list due to life events like marriage, or the need to relocate for a new job.
However, the housing market is unlikely to see a complete turnaround. Sales will still be well below what they were during the pandemic, given that home sales fell 19% in 2023, according to Redfin data. Zillow-counted home listings, meanwhile, were still 25% below their pre-pandemic rate in January.
“I don’t think it’s going to be a massive rebound. It’s hard to imagine where a lot of volume would come from,” Olsen said, noting that most homeowners still felt locked into their homes by the rates. high mortgage rates. “Until we see mortgage rates really improve, we don’t expect landlords to come back very, very soon.”
Mortgage rates are poised for only a slight net decline in 2024, Fairweather and Olsen predicted. Both Redfin and Zillow estimate that the 30-year fixed mortgage rate will probably end the year around the current level, dropping to 6.5%.
Rates have fallen sharply in recent months as markets expect the Fed to loosen monetary policy this year. However, the Fed’s own view is to cut rates by just 75 basis points this year, about half the amount that investors are estimating.
“I think the market has absorbed a lot of expectations about what the Fed is going to do. So we’re going to have to see something surprising and positive to cut rates more than they are now,” Fairweather said.
Affordability conditions have steadily improved after a bad year for the housing market. Home prices rose to a near-record high in 2023, with the median U.S. home price peaking at $425,000 last June, according to Redfin. Meanwhile, home sales fell to their lowest level since 1995 last year, according to the National Association of Realtors.