2024 Housing Market Outlook: A Shift Towards Recovery

As we step into 2024, it’s essential to reflect on the previous year’s housing market trends to understand where we’re headed. The year 2023 was marked by slow home sales, rising interest rates, and inventory constraints. However, the upcoming year shows promising signs of change and recovery in the housing market.

Rebound in Home Sales Activity

One of the most notable shifts expected in 2024 is the rebound in home sales activity. This change is primarily attributed to the anticipated decrease in mortgage rates. Since July 2023, the Federal Reserve has maintained a steady federal funds rate, and the market now anticipates a reduction in this rate in 2024. This expected decrease in mortgage rates, which have been on a downward trajectory since November 2023, is likely to rekindle the interest of potential homebuyers. Many who were deterred by the high rates of 2023 are expected to return to the market, leading to increased activity, faster home sales, and potentially more competitive bidding on available properties. While the overall sales volume may still be below the average of recent years, 2024 is poised to offer a much-needed boost compared to the sluggish numbers of 2023.

Trends in New Construction

The new construction sector is set to experience varied trends in 2024. While the multifamily sector may see a slowdown, an increase in single-family housing construction is anticipated. The lock-in effect, prevalent in 2023, where homeowners were reluctant to sell due to favorable interest rates obtained in 2020 and 2021, contributed to low inventory levels. Additionally, the slow pace of new housing construction in 2023, influenced by higher interest rates, further strained inventory. In 2024, however, we expect to see a rise in new single-family homes and townhomes, particularly in local markets across Virginia. This shift indicates a move away from the previous focus on multifamily housing construction.

Home Price Growth: A Continued Climb at a Slower Pace

In terms of home prices, Virginia’s markets are likely to continue the trend observed in 2023, with prices climbing but at a slower pace. Last year’s tight inventory conditions led to higher median home price growth, but the rate of growth decelerated as interest rates increased. With more inventory expected in 2024, the upward pressure on prices from the supply side should soften. However, the influx of potential buyers and the likelihood of bidding wars on listed homes will maintain stable and upward-trending home prices. Overall, we anticipate a continued but more moderate increase in home price growth.

Conclusion

In conclusion, 2024 presents a landscape of gradual recovery and adjustment in the housing market. With changes in mortgage rates, new construction trends, and home price dynamics, the market is gearing up for a year of renewed activity and opportunities. For homebuyers, sellers, and industry professionals, staying informed and adaptable will be key to navigating the year ahead.