Real Estate: Zillow Says Buyers Will Have More ‘Financial Breathing Room’ in 2024
The housing market has seen ups and downs over the past several years. For many buyers, purchasing a home has become very cost-prohibitive. Zillow reported that mortgage interest rates are currently at a 20-year high.
Thankfully, Zillow also estimated that buyers should see a “bit more financial breathing room in 2024” in terms of the number of available homes for sale, lower home prices, and more rental opinions.
5 Reasons 2024 Housing Market Will Be More Favorable for Buyers
Skylar Olsen, Zillow’s chief economist, explained, “I expect the beginning of a long healing process to kick off in the housing market next year. 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.”
She went on to say that while many will continue to rent, as single-family rental demand will be strong, recent deliveries are predicted to keep rent growth down and concessions high.
1. Homebuying Costs Will Taper Off, Giving Buyers a Chance in the Market
Zillow data showed that a typical homebuyer in October 2023 would have spent an incredible 40% of their earnings on their mortgage payment, an all-time high that hasn’t been seen since the 1990s.
While affordability will undoubtedly remain the top concern for potential homebuyers in 2024, there is reason to expect those challenges to ease just a bit. Rates will likely remain where they are for several more months, but the cost of purchasing a home in 2024 should decrease as mortgage rates fall, at least slightly. Lower rates will allow more people to have enough monthly budget to factor in a mortgage payment.
2. Artificial Intelligence (AI) Will Change How Buyers Search for Homes
Although little known, Zillow has been leveraging AI technologies since 2006 to create its “Zestimate” feature, which gives an estimate of what a home will sell for based on market trends and location. With the rise in generative AI tools in 2023, Zillow expects AI to play a big role in both the home shopping and homebuying experience next year. To add, AI will also assist agents and brokers with creating home listings and improve how they communicate with buyers and sellers.
3. Single-Family Rentals Will Be the New Starter Home
While home affordability is predicted to improve in 2024, many will still be priced out. Data showed that the median renter is now 41 years old — up from 37 in 2000 — and the types of rentals they’re interested in have likely shifted.
Another possibility that will fuel this single-family rental trend is that homeowners could decide to turn their home into an investment property and rent it out, rather than selling it when they want to move. The reason? Current homeowners who were lucky enough to lock in ultra low mortgage rates before they skyrocketed don’t want to sell and lose the favorable rates they have.
4. Traditional Homebuyers Will Compete with House Flippers for Homes That Need Improvement
Home flippers, those who buy dilapidated homes that need a little (or a lot) of TLC before they can sell them to a new buyer, will have more opportunities in the market.
Slightly lower interest should increase the stock of available homes on the market as buyer demand increases. This will lead to more home flipping and increased competition between flippers and buyers who are looking to purchase a home. Some buyers will be willing to overlook small flaws, such as an outdated kitchen or bathroom, to secure a home.
5. Rental Demand Will Surge Near Downtown Areas Like in New York City
The pandemic spurred the rise in rental prices in suburban areas as many fled cities when lockdowns began. But now, as the pandemic emergency has ended, the demand that shifted from urban centers to the suburbs will swing back to cities.
Further data showed that there’s pent-up demand for rentals in downtown areas. For example, demand for rentals in areas with plentiful commute options and easy access to Downtown or Midtown Manhattan is up. Meanwhile, areas farther from business-centric neighborhoods are starting to see somewhat less demand. Some landlords are even offering concessions to renters in urban areas to further incentivize them to move in.