Housing market predictions: The forecast for the next 5 years
The real estate market has experienced a whirlwind of activity in recent years, with record-low interest rates and fierce bidding wars giving way to a surge in mortgage rates not seen in over two decades. As we approach 2024, it’s crucial to look ahead and plan for the future. We’ve tapped into insights from industry experts to provide you with a forecast for the next five years, offering a glimpse into what the market might look like in 2028.
Current Market Snapshot
- Home sale prices: In July 2023, the median existing-home sale price reached a record high of $406,700, while new-construction homes came in slightly higher at $436,700.
- Inventory: Although inventory has increased from the previous year, it remains limited, with a 3.3-month supply of unsold existing homes in July, compared to the 5- to 6-month supply needed for a balanced market.
- Days on market: With higher mortgage rates, homes are taking longer to sell, with a median of 20 days on the market in July, up from 14 days the previous year.
- Homes sold: Existing home sales saw a more than 16 percent year-over-year decrease in July, while new single-family home sales rose by 4.4 percent.
- Mortgage rates: As of late August, the average 30-year mortgage rate stood at 7.32 percent, the highest since 2001.
Forecast for Mortgage Rates and Types
Experts predict that mortgage interest rates may continue to rise, with rates hovering around 7 percent for the remainder of 2024. Within two years, there’s an expectation that rates will settle around 5.5 or 6 percent. Adjustable-rate mortgages may see increased interest in the short term due to high rates, but the traditional 30-year fixed-rate mortgage is expected to reclaim its dominance in the long run.
Predictions for Home Prices
Experts foresee relatively stable nationwide home prices in the coming year, with fluctuations of around 5 percent in either direction. California, due to its high cost of living, may experience a 10 percent decline in prices. Overall, over the next five years, prices are projected to appreciate by 15–25 percent.
Avoiding a Housing Market Crash
While there may be bubble-like characteristics, experts believe there is no immediate danger of a housing market crash. Strict lending standards and a scarcity of inventory are key factors in preventing a crash scenario. A balanced market is expected within five years.
Shifting Market Dynamics
The seller’s market is expected to persist as long as housing inventory remains low. However, by the end of five years, a more balanced market is anticipated, where neither buyers nor sellers hold a significant advantage. The balance of power will depend on individual circumstances.
Where and What Will Be Built
Suburban markets are predicted to remain strong, driven by the rise of hybrid work schedules and reduced commuting needs. Growth is expected in areas with increasing populations, such as the Carolinas, Florida, Texas, and Tennessee. Single-family construction is predominantly occurring in the South. The multi-family market’s growth is expected to stabilize in the coming years.
Tips for Preparing to Buy a Home by 2028
- Increase Earning Power: Consider exploring job opportunities to boost your income potential.
- Reduce Debt: Focus on paying down existing debts to improve your debt-to-income ratio.
- Enhance Credit Score: A higher credit score can lead to lower mortgage rates. Pay bills on time and work towards a better score.
- Local Focus: Real estate trends vary greatly by locality. Seek the guidance of a knowledgeable local real estate agent to navigate your specific market.
Conclusion
As we look ahead to 2028, the real estate market is poised for change, with evolving trends in pricing, mortgage rates, and market dynamics. By preparing now, you can position yourself for success in achieving your homeownership goals. Remember, patience, careful planning, and local expertise are your greatest allies in this journey.