Home prices expected to rise by 2024: Not enough homes to meet demand - economist says Home prices expected to rise by 2024: Not enough homes, economist says to meet demand.

According to forecasts from several real estate research firms, including Freddie Mac, Zillow and the National Association of Realtors, home prices will continue to rise in 2024 despite the recent downturn. That's because homes aren't being built fast enough to meet demand, putting upward pressure on prices, says NAR chief economist Lawrence Yun. There are too few homes for too many buyers, and NAR expects home prices to rise 2.6 percent in 2024.

"There just aren't enough homes for sale," Yun said in the latest report. "The market could easily absorb a doubling of inventory. "

Although home construction has increased slightly in recent months, the United States is still short about 3.8 million housing units for sale and rent, according to the latest Freddie Mac estimates.

In addition to the 42 percent increase in home prices from January 2020 through June 2023, many homes on the market are still receiving multiple offers, meaning that "housing demand is not being met due to a lack of supply," Yun said in a July report.

What to expect in 2024

In 2022, many potential buyers couldn't afford to buy after rates on 30-year fixed mortgages nearly doubled, according to Freddie Mac.

This price decline was short-lived, however, as recent growth has already offset it. By July, the median price of a home sold was $406,700, up 1.9% from a year earlier.

While mortgage interest rates are still high - currently at 7.28% for 30-year fixed mortgages - demand for homes keeps prices high. Mortgage rates are expected to fall to 6 percent in 2024 amid slowing inflation, further spurring demand and keeping prices high throughout the year, Yun said.

There's a similar forecast from Zillow, which expects home values to rise 6.5 percent from July 2023 through July 2024, despite "persistent affordability challenges".

Also Freddie Mac predicts price growth of 0.8 percent from August 2023 through August 2024, and then another 0.9 percent in the next 12 months. Part of the price increase is based on "a large group of young first-time home buyers of the millennial generation," according to Freddie Mac.

But not all forecasts predict rising home prices. Based on declining affordability and an increase in the number of homes being built, Moody's Analytics and Morgan Stanley expect a slight decline in home prices in 2024.

Moody's says "it's too early to rejoice in the end of the real estate market correction," so they expect a 3.5 percent decline in median home prices between the fourth quarters of 2023 and 2024, according to an updated forecast provided by CNBC Make It.