Richard Newstead/Getty Images
- The housing market will see a stronger, prolonged spring homebuying rush this year, real estate pros say.
- The seasonal buying frenzy could lead prices to surge as much as 5%, Redfin forecasted.
- Buyers and sellers are slowly wading back into the market as mortgage rates edge lower.
The housing market is about to pick up in a stronger-than-usual spring homebuying rush — one that could send house prices surging through the end of 2024, real estate experts say.
That's not what economists had originally expected for the housing market this year. Redfin previously predicted that prices would stay mostly flat, forecasting a slight 1% decline in December.
But there's way more upside now, Redfin's chief economist Daryl Fairweather said, basing her updated forecast on signs that the spring buying season will likely be a lot stronger than last year.
A strong spring homebuying rush — which typically starts in early March and begins tapering in the back half of the summer — could bring home prices up as much as 5% by the end of the year, Fairweather estimated. Home sales could also surge 5% by the end of the year, she said.
Skylar Olsen, Zillow's chief economist, estimates a similar uptick in home prices and sales, thanks to a spring housing boom that will likely be stronger and more prolonged than last year. Olsen thinks prices could surge by 3.6% by the end of the year as buyer interest picks up, while Zillow-counted home sales stay relatively flat.
Some of that buyer interest was already evident when mortgage rates ticked lower at the end of last year, Olsen says. In December, Zillow saw an uptick in search interest for homes, as well as an increased interest in home showings.
Redfin real estate agents are also already beginning to notice an uptick in buyer interest. More buyers have been shopping around, but have been waiting to pull the trigger on buying a home, Fairweather added – another possible sign that the spring months will see a bigger upswing this year than usual.
"I think we hit rock bottom and the only way to go from here is up," Fairweather said.
Lower rates are thawing the market
A burst of activity this spring would mark a shift from an anemic 2023, when the housing market was stuck in low gear by elevated interest rates which created a "lock-in" effect that deterred both buyers and sellers.
That dynamic is starting to change as mortgage rates trend lower. Rates have slumped from a peak of around 8% reached in October to about 6.6% in the past week, according to Freddie Mac data.
That's been a big incentive for prospective buyers to get back into the market, Fairweather said – a key reason why the housing market is expected to be stronger this year.
Meanwhile, more homeowners are starting to realize they can't hold out any longer waiting for mortgage rates to fall, Fairweather added. Borrowing costs aren't returning back to their pandemic-era lows anytime soon, and many prospective sellers are being forced to list due to life events like marriage, or needing to relocate for a new job.
Still, it's unlikely the housing market will see a full turnaround. Sales will still be way below where they were during the pandemic, given that home sales plunged a whopping 19% in 2023, according to Redfin data. Zillow-counted home listings, meanwhile, were still down 25% below their pre-pandemic norm in January.
"I don't think it's going to be a massive rebound. It's hard to imagine where a lot of the volumes would come from," Olsen said, noting that most homeowners still felt locked into their homes from elevated mortgage rates. "Until we see mortgage rates really improve, we don't expect owners to come back very, very quickly."
Mortgage rates are only poised for a slight net decline in 2024, Fairweather and Olsen predicted. Both Redfin and Zillow estimate that the 30-year fixed mortgage rate will probably end the year around its current level, dipping to 6.5%.
Rates have fallen considerably in recent months as markets anticipate the Fed to loosen monetary policy this year. Yet, the Fed's own view has it poised to trim rates by just 75 basis points this year, about half the amount investors are pricing in.
"I think the market has absorbed a lot of the expectations about what the Fed is going to do. So we would need to see something surprising and positive to get rates to come down more than where they already are right now," Fairweather said.
Affordability conditions have been steadily improving after a bad year for the housing market. Home prices rose to a near-record in 2023, with the price of the median US home peaking at $425,000 last June, according to Redfin. Meanwhile, home sales plunged to their lowest level since 1995 last year, according to the National Association of Realtors.