The real estate market has been a bit of a roller coaster lately, with low inventory and rising interest rates putting a damper on things for several months. But as we look toward 2024, there may be a shift on the horizon. While the Federal Reserve’s potential rate cuts this summer could open the door for more buyers, some challenges will persist. Here’s what experts are saying about the market in the years to come and how millennial buyers are shaping the future of homeownership.
Will Lower Interest Rates Really Help?
The Federal Reserve has hinted at lowering interest rates this summer, which could entice more buyers into the market. In theory, lower rates make borrowing more affordable, which could boost home sales. However, according to Freddie Mac, these changes are unlikely to drastically alter the market’s dynamics. Even with lower rates, many homeowners locked into ultra-low mortgage rates from pre-pandemic times are hesitant to move. As a result, inventory will likely remain tight, making it harder for buyers to find homes in the first place.
Home Prices Are Likely to Keep Rising
Despite predictions that mortgage rates might come down, Freddie Mac forecasts that home prices will continue to climb, albeit at a slower pace. They predict a 2.8% increase in 2024 and another 2% bump in 2025. While this may sound like a slow crawl compared to the rapid appreciation seen in recent years, it’s still a steady upward trend. This means that even if rates decrease slightly, prospective buyers will still face rising home prices, making it a challenge for those looking to get into the market.
A Surge in Home Sales?
It may seem counterintuitive, but despite the challenges, the National Association of Realtors (NAR) is predicting a major jump in home sales in 2024. They project an increase of 13% year-over-year, with sales potentially rising another 16% in 2025. How is this possible? According to NAR, demand will still be there—driven in large part by millennials who are eager to become homeowners. The shortage of homes might be a barrier, but for this generation, it’s a challenge they’re willing to tackle.
Millennials Are the Driving Force
If there’s one thing that’s clear, it’s that millennials will be the key demographic pushing home sales in the next few years. Recent surveys show that a significant portion of this generation is willing to take on higher mortgage rates (even above 7%) just to get into the housing market. More than 30% of millennials say they’re prepared to stretch their budgets to the limit in 2024 in order to purchase a home. With so many young buyers motivated to make the leap, we can expect them to fuel the market, even if conditions aren’t ideal.
Looking Ahead to 2025
Looking further ahead, 2025 could bring even more optimism to the housing market. The National Association of Realtors forecasts that home sales could jump by nearly 16% from 2024 to 2025, as the market adjusts to the new normal of higher rates and limited inventory. While the market may never return to the frenzy of the pandemic years, it’s clear that buyers are resilient. With millennials leading the charge and the broader economy continuing to evolve, the real estate sector could experience steady growth in the coming years.
Conclusion
While the real estate market faces challenges in 2024—rising prices, low inventory, and ongoing affordability issues—there are signs of growth on the horizon. Millennials are poised to play a major role in shaping the market, willing to take on higher rates and stretch their budgets to achieve homeownership. Even with a projected increase in home prices and limited inventory, the housing market might just surprise us with a strong recovery in the coming years.
