Real Estate Market Predictions: Six experts assess the outlook for the real estate market in 2024.

No other phrase has defined the real estate market in 2023 as much as the "mortgage rate lock-in effect" - a phenomenon that has driven the industry to paralysis, putting pressure on everything from inventory levels to home sales.

More than 85% of mortgage holders have been held back from selling their home and buying another at higher interest rates, which peaked at 7.79% in the week ending Oct. 26, according to Freddie Mac.

But will the situation change this year? There are signs that market conditions will improve. Mortgage rates have fallen steadily over the past seven weeks, averaging 6.61 percent for 30-year fixed mortgages in the week ending Dec. 28.

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Lower mortgage rates gave a boost to existing-home sales, which rose 0.8% in November from October and broke a streak of five consecutive monthly declines, according to the National Association of Realtors. On a year-over-year basis, sales were down 7.3% (compared to 4.12 million in November 2022).

The National Association of Realtors' chief economist Lawrence Yun said: "We should expect a significant turnaround in mortgage rate cuts in recent weeks. "

The housing shortage continues

Most experts don't expect the housing shortage to end, however. Realtor.com chief economist Danielle Hale said: "Regardless, families will have more options available to them in 2024 because of upward construction of single-family homes and the completion of a large number of multifamily units, most of which are for rent. "

An additional supply of new construction homes and apartments will hold down housing and rental prices despite long-term shortages. Today's severe supply shortage will be difficult to correct, says First American's deputy chief economist Odeta Kushi. She said: "While single-family housing construction has continued to grow through 2023, it will take many years of robust new home construction to narrow the supply gap caused by more than a decade of intense development. "

Home price growth will vary from market to market

National home sales are expected to rise only slightly in 2024 from a long-term low in 2023. Real estate activity will vary significantly from market to market, with some "hot" markets expecting double-digit growth, Hale said.

Total sales and market prices will be highest in two major market groups. The first is affordable markets in the Midwest and Northeast region, such as Toledo, Ohio, and Rochester, New York. The second group is in Southern California, where lower mortgage rates could help that region recover from a particularly slow 2023.

The median value of existing homes of all types totaled $387,600 in November, a 4% increase from November 2022 ($372,700). All four U.S. regions showed price increases.

Mortgage rates and affordability

Most experts predict that the average rate on a 30-year mortgage will range between 6.1% and 7% in the first quarter, then decline throughout the year. Redfin chief economist Daryl Fairweather says: "Mortgage rates are likely to remain significantly higher than historic lows as financial markets increasingly believe the country has avoided a recession in 2024. Mortgage rates will fall to 6.6% by the end of 2024. A gradual decline in rates and a slight drop in prices will bring homebuyers that long-awaited relief. "

Volatility ahead of the election can cause volatility in mortgage rates, so rate estimates for 30-year fixed mortgages will be in the range of about 6%. According to Jeff Taylor, founder and managing director of Mphasis Digital Risk.

At a rate of 7.125% and the current median home value, it would take $111,000 and $107,000 of household income, respectively, to buy a new and existing home with a 5% down payment. If mortgage rates fall 1% to 6.125% and home prices increase by a modest 4%, as the Federal Housing Finance Agency projects in 2024, it would take $105,000 and $99,000, respectively, to buy a new and existing home with a 5% down payment.

Building new housing

With mortgage rates falling and a housing shortage, the chief economist for the National Association of Home Builders predicts single-family housing starts will rise in 2024. This would be the first year of growth after declines in 2022 and 2023. Detz says, "Because of the low availability of existing housing, new construction has risen to about one-third of single-family housing over the past few months, when historically it has been only 10-15%. "

Multifamily construction will decline. Financial conditions are very difficult and about one million apartments are now under construction, the highest number since 1973. The scope of repairs will remain at approximately the same level as 2023. Real estate stock is aging and needs reinvestment (typical U.S. home over 40 years old).

Swapna Venugopal Ramaswamy is a housing and economic affairs correspondent for USA TODAY. You can follow her on Twitter @SwapnaVenugopal and sign up for our daily money newsletter here.