Home buying will remain expensive, so expect a competitive
market for homes that need some work and for single-family
rentals
- Affordability will remain a challenge, but Zillow expects
buyers to have more options and a bit more financial breathing room
in 2024.
- Rental market competition will be strong, especially for
single-family rentals and units with an easy commute to downtown
office hubs.
- Artificial intelligence in real estate will make a leap,
improving the home-buying and selling process for buyers, sellers
and their agents.
SEATTLE, Nov. 30,
2023 /PRNewswire/ -- The housing market's headline
news this year has been the affordability challenge brought on by
mortgage rates reaching 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 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. 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."
More homes will hit the market as homeowners accept that
current mortgage rates are sticking around
"Higher for
longer" is the key refrain regarding mortgage rates as Zillow
economists look ahead to the next year in housing. It's becoming
clear that high mortgage rates have some staying power. Zillow
economists expect more homeowners who locked in long-term payments
when rates were near all-time lows to list their homes for sale, as
they grow weary of waiting for the historically low rates of 2021
to return.
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.
Home-buying costs will level off, giving hopeful buyers a
chance to catch up
A typical home buyer in October would
have spent more than 40% of their earnings on their mortgage
payment — an all-time high according to Zillow data, which
stretches back to the 1990s. While affordability will undoubtedly
remain the top concern for potential home buyers in 2024, there is
reason to expect those challenges to ease just a bit.
Zillow's latest forecast calls for home values to hold steady in
2024. Predicting how mortgage rates will move is a nearly
impossible task, but recent inflation news gives the
impression that rates are likely to hold fairly steady as well in
the coming months.
The cost of buying a home looks likely to level off next year,
with the possibility of costs falling if mortgage rates do. That
would give time for wages and buyers' savings to grow — welcome
news after the rapid rise in housing costs over the past two
years.
The new starter home will be a single-family
rental
Though Zillow expects some improvement in home-buying
affordability in 2024, many households will still be priced out.
The median renter is now 41 years old, up from 37 in 2000, and the
types of rentals they're interested in has likely
shifted.i
Zillow predicts demand — and prices — for single-family rentals
will continue to increase next year as families look for a more
affordable option for enjoying amenities like a private backyard or
a home that doesn't share walls with neighbors.
One possible path to more single-family rentals could lie in
homeowners deciding to turn their home into an investment property
and rent it out, rather than selling it when they move. The
ultralow mortgage rates held by many existing homeowners make it
more likely that this option would pencil out.
Zillow Rental Manager offers a suite of tools — including
free listings, pricing suggestions, background checks, online
applications and state-specific lease generation — designed to
provide comprehensive support for those seeking rental income from
their homes.
More markets will follow New York
City's lead, with rental demand surging near
downtowns
Throughout much of the pandemic, and even before,
suburban rent prices were growing faster than rents in urban
neighborhoods.ii While the gap has narrowed, suburban
rents continue to outpace urban rents in most major markets,
specifically, 33 of the 50 largest metro areas.iii
In New York City, data from
StreetEasy, Zillow Group's New York
City real estate marketplace, shows demand is surging for
rentals in commutable areas with easy access to Downtown or Midtown
Manhattan, while areas farther from these office-laden
neighborhoods are seeing relatively less demand. StreetEasy experts
predict a strong year for Manhattan demand in 2024, and Zillow foresees
more markets following suit, with rental demand surging near
downtown centers.
Renters looking for a place near downtown will likely have more
options with this year's multifamily-construction boom, which means
a huge number of new homes have hit the market. More choices for
renters looking for a new place means landlords who are trying to
attract tenants have more reason to compete with each other on
price. That's a key reason more rental listings are offering
concessions.
Traditional home buyers will compete with flippers for homes
that need a little TLC
Typically the target of home
flippers, homes that need a little work before they qualify for
"dream home" status will see increased interest from buyers looking
to move in.
Inventory has been far below normal for a while, and though
Zillow economists predict more homes will hit the market in 2024,
inventory will remain much lower than pre-pandemic norms. Faced
with limited choices, buyers will be willing to overlook small
flaws, such as an outdated bathroom or kitchen.
The higher cost of buying a home today makes a flip harder to
pencil out, so buyers may face less competition from flippers than
they might have in previous years. Even with less chance of being
subject to a bidding war, these homes won't come cheap, so expect
buyers to frequent their local hardware stores as they work on DIY
home improvements. If Zillow's 2024 home trends to watch are
any indication, expect brutalist-inspired features and sensory
gardens to be on home improvement to-do lists, but not "cloffices"
or Tuscan kitchen designs.
Artificial intelligence will enhance the home search
experience
Since 2006, Zillow has been leveraging AI and
machine learning to power the Zestimate. Generative AI made waves
this year, and Zillow expects AI advancements to streamline the
home-shopping and home-selling journey in 2024, improving the
experience of buyers, sellers and their agents.
Zillow tech experts expect a variety of new tools and
technologies designed for real estate agents next year, allowing
them more time to connect with more clients and prioritize
face-to-face interactions. Agents have been using AI to assist with
writing listing descriptions and to create 3D content for their
listings. Next year's advancements are expected to focus on visual
and multimodal capabilities, including more rich media
content.
Expect home shoppers to benefit from generative-AI-powered
experiences to glean valuable insights and guidance on home
financing.
About Zillow Group
Zillow Group, Inc.
(NASDAQ: Z and ZG) is reimagining real estate to make home a
reality for more and more people. As the most visited real estate
website in the United States,
Zillow and its affiliates help people find and get the home they
want by connecting them with digital solutions, great partners, and
easier buying, selling, financing and renting
experiences.
Zillow Group's affiliates, subsidiaries and brands include
Zillow®, Zillow Premier Agent®, Zillow Home Loans℠, Trulia®, Out
East®, StreetEasy®, HotPads®, ShowingTime+℠, and
Spruce®.
All marks herein are owned by MFTB Holdco, Inc., a Zillow
affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS
#10287 (www.nmlsconsumeraccess.org). © 2023 MFTB Holdco, Inc., a
Zillow affiliate.
i Based on a Zillow review of the U.S. Census
Bureau's Current Population Survey. Renters are defined as being a
head of household in a household that rents their primary
residence.
ii According to Zillow Observed Rent Index data at the
ZIP code level. ZIP codes were classified as urban, suburban or
rural, and month-over-month and year-over-year changes were then
aggregated nationally and across metro areas for each
classification; those changes were then averaged.
iii Year-over-year changes, as of October 2023.
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SOURCE Zillow