2024 may bring ‘season of hope’ amid lawsuits and AI shifts
Mortgage rates, inventory and prices are expected to improve for homebuyers in the new year as the industry responds to commissions-focused court cases.
Key points:
- Redfin and Zillow researchers agree on most counts, with Redfin expecting a 5% increase in home sales.
- More homebuyers will start working directly with the listing agent, predicts Redfin chief economist Daryl Fairweather.
- The upcoming presidential election could put the spotlight on real estate affordability challenges.
As significant changes swirl around the industry, a pair of new housing forecasts predict 2024 will be a year of small, steady improvement in affordability for potential homebuyers.
More listings, along with slightly lower mortgage rates and home prices, are on the table for 2024, according to forecasts from both Redfin and Zillow. Redfin, which released its report on Dec. 5, also expects a 5% increase in home sales, with momentum picking up in the second half of the year.
"We're starting to see signs of a shift toward a buyer's market as pandemic-driven inflation takes its last gasps, mortgage rates come down and more people list their homes for sale," said Daryl Fairweather, Redfin's chief economist. "We expect these trends to continue in the new year, ushering in a season of hope for aspiring homebuyers."
As economists found out last year, interest rates are hard to predict, so Redfin put some what-ifs into its forecast. If mortgage rates remain stubbornly high and go above 8%, then the company expects home prices will fall 5% or more, with sales dropping to the 3.5 million annualized range.
On the other hand, if mortgage rates drop significantly, falling to around 5%, it's because the economy deteriorated and fell into a recession. While higher unemployment would hurt demand, Fairweather said it would drive sales up to the 5 million annualized range and push home prices up about 3%.
The Zillow and Redfin housing market forecasts are in line with other industry predictions, but perhaps more interesting are their predictions about the impacts of some of the biggest changes the industry has faced in decades. Here are a few of their takes:
Commissions are already changing
Redfin reports in its forecast that it is already noticing changes happening among competitors when it comes to commissions, such as changes to fees, commission refunds and a rise in private listing agreements.
Fairweather predicts more homebuyers will start working directly with the listing agent, something that has long been common in new construction. This trend will become more common in the existing home market as inventory remains low and competition among agents is high.
More visibility coming from artificial intelligence
In its report, Zillow predicts the wave of AI technology will build in 2024, with the new year bringing more advancements to visual capabilities that improve multimedia listings content.
The Zillow research team also expects AI to drive improvements in home financing guidance, which could help homebuyers better navigate options during what could be another volatile year for mortgage interest rates.
Big election could put real estate in the spotlight
With 2024 being an election year, the presidential candidates as well as others running for congressional office are expected to propose solutions to tackle the nation's affordability challenges.
Even if affordability begins improving in 2024, many potential homebuyers (and voters) will be playing financial catch-up for a while, Fairweather said.
"We expect President Biden and his opponents to make splashy housing policy proposals to try to lure voters who are unhappy with their economic prospects," Fairweather said.
"Democrats are likely to focus on subsidizing down payments for first-time homebuyers, promoting inclusionary zoning and funding housing vouchers, which are all popular with liberal voters. Republicans are more likely to focus on reducing regulations that limit development."