Redfin 2024 Forecast: Renting to Lose ‘Stigma,’ Home Prices to Fall, More

NEW YORK – Younger millennials and Gen Zers will continue to redefine the American Dream in 2024, focusing on renting housing rather than owning so they can invest their money elsewhere, Redfin’s chief economist says Tuesday.

Prices of large rental units will climb next year to meet the rising demand. At the same time, prices for smaller rentals will face downward pressure because “there are more of them and a backlog waiting to hit the market,” Daryl Fairweather says.

“With prices so high, buying a home doesn’t offer the same financial upside to young millennials and Gen Zers as it did baby boomers and Gen Xers. Rather than shelling out cash on agent fees, interest on a loan, property taxes, insurance and maintenance, many will decide that renting and investing their money in other ways makes the most sense,” she says.

Fairweather’s forecast for housing renting is just one of several predictions the real estate company made for the coming year. Others:

• Home prices will fall 1%
  Prices will decrease 1% year over year in the second and third quarters of 2024, marking the first time prices have declined since 2012 (with the exception of a brief period in the first half of 2023.)
• New listings will increase
  The housing supply will increase more than demand in 2024, pushing home prices down. Homeowners will want to sell before prices fall. Already in areas like South Florida, where prices have soared, homeowners are deciding to cash out their equity to move to more affordable areas.
• Home sales will increase, ending the year up 5%
  In the first quarter of 2024, existing home sales will be on pace for 4.1 million total, up from an annual pace of 3.85 million in the last quarter of 2023. “Overall, we expect 4.3 million sales in 2024, up 5% year over year. A crucial difference between 2024 and 2023 will be sales gaining momentum throughout the year instead of losing momentum,” Fairweather says.
• Mortgage rates will hover about 6%
  The average 30-year mortgage rate will stay about 7% in the first quarter and then steadily decline. By the end of 2024, the rates will fall to about 6.6%.
• Prices will fluctuate nationwide
  Parts of coastal Florida – including North Port and Cape Coral – will see home prices drop, while other areas, like Albany, N.Y., and Grand Rapids, Mich., will see a rise in prices.
• Local governments will look to help
  Local governments will increasingly adopt land-value taxes to make homes more affordable and encourage new construction.

Ultimately, there are two different scenarios – an upside and downside – that could occur next year, Fairweather says.

• Weekly average 30-year fixed mortgage rates could drop into the 5% range if the U.S. economy falls into a recession. “While higher unemployment would drag down demand, the effect of lower mortgage rates would outweigh that effect, pushing prices up by about 3% and sales up to about 5 million,” she says.
• Or If the feds hold the interest rates steady all year, mortgage rates could surpass 8% and stay high through 2024. “Home prices could fall 5% or more, and sales could drop into the 3.5 million range,” she says.

“Our 2024 predictions are set against a backdrop of economic unpredictability,” Fairweather says. “Our outlook could change due to uncertainty in other areas: financial market volatility, the course of the wars in Europe and the Middle East and the U.S. presidential election.”

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