According to new predictions from Zillow, affordability will continue to remain a challenge for the foreseeable future, but they now predict that conditions will improve at some point in 2024, giving buyers more breathing room in their search for housing.
Those that can’t buy are turning to rentals, leading to increased demand in that market, especially for apartments and single-family rentals with easy access to dense employment areas such as city centers.
Zillow also predicts artificial intelligence (AI) in real estate will continue to advance and be quickly adopted by the industry, improving the home-buying and selling process for all involved properties.
The big news in 2023 was dominated on topics of worsening affordability, shrinking inventory, and mortgage rates which hit 20 year highs. Looking ahead to 2024, Zillow predicts home buyers will have a bit more breathing room—but only a bit.
Buying a home will remain expensive, keeping pressure on the rental market to cater to families that will be renting for longer than previous generations. Many who buy will turn to homes that need some work, according to Zillow's predictions, and do-it-yourself upgrades and repairs will keep new homeowners busy.
"I expect the beginning of a long healing process to kick off in the housing market next year," said Skylar Olsen, Zillow's Chief Economist. "We know there are a huge number of households in prime home-buying ages waiting for the winds to turn in their favor.”
“While still presenting challenges, the market will be better for buyers, with more homes to choose from and improved affordability,” Olsen continued. “Many will continue to look toward rentals, and given renter demographics single-family rental demand in particular will be strong. Recent deliveries should keep rent growth down, and concessions high in that market, too. This is our breather year."
A very small pool of homes for sale has kept competition fairly stiff for most of this year, even with high costs limiting the number of shoppers. With mortgage rates rising over the past two years, homeowners have been reluctant to sell, opting instead to hold onto the ultralow interest rate on their current mortgage. Many of those homeowners will have their eye on a home with a bigger backyard, an extra bedroom or in their preferred neighborhood across town, and Zillow predicts more of these homeowners will end their holdout for lower rates and go ahead with those moves.
More homes on the market would be good news for buyers, spreading demand and slowing price growth.
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