Now that I've published the 2024 S&P 500 predictions, let's look at the 2024 housing market predictions by various industry experts. The forecast for 2024 home prices ranged from -1.7% to +4.1% when I first published this post at the end of 2024. Now as of January 29, 2024, the 2024 home price forecasts have inched up.
Real estate is my favorite asset class to build wealth. It generates income, provides utility, is less volatile, is more easily understandable, can be improved upon, is more controllable, and is less efficient than stocks. Earning rental income was the main reason why I could retire early in 2012.
Given my preference for real estate over stocks, I've allocated about 50% of my net worth to real estate. I also see real estate as a bond plus type of investment, with more potential upside and less potential downside.
For most regular people, real estate will also be the best way to build wealth over time. Forced savings every month tends to build wealth for even the most undisciplined spender.
Before we go through the 2024 home price forecasts, let's review the 2023 home price forecasts to see how industry experts fared. I'll also review my own 2023 home price forecast.
Reviewing The 2023 Home Price Forecasts
According to the St. Louis Federal Reserve data, the median home price in America was $479,500 in 4Q2022. Based on the latest data as of 3Q2023, the median home price in America is $431,000, for a decline of 10.1%. We need to wait several months to see what the 4Q2023 median home price figure is. Once the data is out I’ll update this post.
I've been using the St. Louis Federal Reserve data as the consistent median home price benchmark. However, if you ask other housing data aggregators, you'll get some different numbers. Some have median home prices up for 2023. But as I like to stay consistent, I'll stick with the St. Louis Fed data.
You can clearly see the dip in the median home price in 2023 in the chart below.
With a 10.1% decline as of 3Q2023, let's now look at the 2023 housing price forecasts made at the end of 2022 or the beginning of 2023. Many of these forecasts changed throughout the year. However, it's still good to know what was expected at the start of 2023.
The Least And Most Accurate 2023 Home Price Predictions
As you can see from the chart, Zonda, GS, and Financial Samurai made the most accurate 2023 housing price forecasts. As a result, I will start a real estate consulting business and charge big bucks like John Burns Real Estate Consulting (JBREC), which was off by 10% – 12%. Nah, too much work.
More than half the battle in forecasting is getting the direction right. If you don't get the direction right, you're already dead in the water. So even though JBREC was overly bearish, at least it was directionally correct.
Why Did Some Housing Experts Get Their Price Forecasts So Wrong?
In retrospect, it seems obvious the median home price would go down after the Fed began hiking rates aggressively in 1Q 2022. Home prices had also shot up way beyond average in 2020 and 2021. As a result, I came out with a relatively aggressive -8% forecast for 2023.
So how did Mortgage Bankers Association (MBA), Zillow, NAR, Corelogic, and Realtor get their direction wrong? And why were Corelogic and Realtor so bullish with their forecasts?
I suspect the more you rely on a healthy real estate market to drive profits for your business, the more biased you will be for higher home prices. Despite all the data available to Zillow, for example, it consistently gets their home price forecasts wrong. It even lost half a billion dollars after shutting down its iBuying business!
Financial Samurai also earns advertisement revenue from real estate partners. However, I don't run a real estate business. I do my best to remove my biases and explain my conclusions. I can't get my forecasts too wrong because I rely on my passive income to fund our lifestyles.
As ~50% of my net worth is in real estate, I would have liked to have predicted higher prices in 2023, but I didn't. No matter how I wanted to say real estate prices would rise, I couldn't because fundamentals were out of line.
2024 Home Price Forecasts By Industry Experts
Below are the various 2024 home price forecasts by MBA, Fannie Mae, Freddie Mac, HPES, Goldman Sachs, NAR, Zillow, and Realtor.com as of end of 2023.
Below are the various 2024 home price forecasts by MBA, Fannie Mae, Freddie Mac, HPES, Goldman Sachs, NAR, Zillow, and Realtor.com as of January 29, 2024. Notice the uptick in the house price forecasts. Notice the increase among Zillow, Goldman, MBA, in particular.
The good news for those who are bullish is that you can discount the bearish Zillow and Realtor.com forecasts because they were so wrong in 2023.
MBA's 5% housing price forecast for 2024 looks like an outlier. As a result, we might have to discount MBA as well. MBA also believed home prices would increase in 2023. Perhaps MBA is playing catchup to its erroneous 2023 forecast.
The average 2024 housing price forecast by all eight is for an increase of 2.5% from 1.5% at the end of 2023, which seems reasonable compared to the historical increase of about 4.5%.
Redfin 2024 Home Price Forecast
Redfin also came out with its 2024 housing price forecast and called for a 1% overall decrease for the year. Redfin's 2023 home price forecast of -4% was pretty accurate, so we should take note.
But here's the thing, Redfin and I are looking at a different home price indices. The firm writes:
Prices will fall 1% year over year in the second and third quarters, when the home-selling season is in full swing. That will mark the first time prices have declined since 2012, when the housing market was recovering from the Great Recession, with the exception of a brief period in the first half of 2023.
That’s a favorable shift for buyers: Prices are ending 2023 up around 3% year over year, and the typical homebuyer’s monthly payment is only about $150 shy of its all-time high. Home prices will still be out of reach for many Americans, but any break in the affordability crisis is a welcome development nonetheless.
Isn't this interesting? Redfin thinks the median home price was up 3% in 2023 while the St. Louis Fed says median home prices were down 10% as of 3Q2023. Maybe we'll see a massive 14% rebound in 4Q2023 prices when the St. Louis Fed releases the data, but I have my doubts.
If what Redfin believes is true, then MBA, NAR, Zillow, Corelogic, and Realtor.com are right with their 2023 price forecasts after all!
Freddie Mac House Price Index
The Freddie Mac data shows home prices rose 2.88% in 2023. This seems doubtful given the huge jump in mortgage rates over the last two years.
I wish the housing industry would all follow one median home price index. But it does not. So which index do you trust? I trust the St. Louis Federal Reserve data more.
Financial Samurai 2024 Housing Price Forecast
After a ~10% decline in the median 2023 home price in America according to the St. Louis Fed, I believe there will be a rebound in 2024. Therefore, I expect home prices to go up by more than 0% in 2024.
To stay within the industry band, I could stay conservative and forecast between a 1.5% – 2.8% price appreciation. However, I'm going to go out on a limb and forecast a 4.5% median home price appreciation for 2024.
A 4.5% rebound after a 10% decline still leaves prices down about 6% from peak levels. But at least it's heading back in the right direction for homeowners.
Reasons for my higher-than-average 2024 home price forecast:
- Growing pent-up demand since mid-2022, when the Fed began its aggressive 11-rate-hike cycle. Homebuyers can't put their lives on hold forever.
- Mortgage rates will likely continue to decline, thereby igniting demand during the historically strong Spring season.
- Still lower-than-average supply due to the locked-in effect of locking in the lowest mortgage rates in history in 2020, 2021, and 1Q 2022.
- Growing demand for real estate due to the millennial generation firmly into their home buying and family formation years. There are supposedly about 72.5 million millennials.
- A bull market in stocks has made the investor class richer in 2023 and potentially even richer in 2024 due to positive Wall Street forecasts for the S&P 500
- Home prices tend to lag the S&P 500 by 6-12 months. Hence, if the S&P 500 really gets back to an all-time high in 2024, the median home price should eventually do so as well.
- I'm using the St. Louis Fed data not the Freddie Mac Home Price Index.
- A potential revaluation in U.S. home prices that catches up with Canadian home price valuations. U.S. home prices are cheap compared to Canadian home prices, yet the pay in the U.S. is much greater than the pay in Canada.
Positive Bias Toward Home Prices In 2024
The real estate industry average prediction of 1.5% home price appreciation in 2024 suggests most homeowners can expect stability, if not slight gains.
Even the more pessimistic forecasts—like Redfin’s 1% decline or Realtor.com’s 1.7% dip—indicate a relatively flat market rather than a crash. For existing owners, I doubt small decreases will have a major impact.
Remember, real estate markets are inherently local. Individual cities may outperform or underperform based on local economic factors and catalysts. For example, Austin could see continued price declines after overheating led to oversupply.
On the whole though, positive macroeconomic trends point toward real estate strength in 2024.
Holding Onto San Francisco Real Estate
Given the rapid advancements in artificial intelligence, I believe demand for San Francisco real estate will also grow over the long term. With the NASDAQ up 50%+ in 2023, many tech workers have seen their wealth grow substantially. I expect a surge of home-buying interest in 2024 as these workers receive year-end bonuses and look to invest their newfound gains.
Past trends support this thesis. I witnessed firsthand how an influx of newly-minted millionaires after the Google and Facebook IPOs bid up local real estate prices. With the promise of AI potentially exceeding the impact of those companies, San Francisco may see another wave of tech wealth flowing into its housing market.
On top of that tailwind, mortgage rates could decline further in the year ahead. If 30-year fixed rates dip below 6% again, bidding wars could become commonplace once more.
Of course, market predictions are notoriously fickle. But as a 20+-year real estate investor, I believe the fundamentals point to resilient home price growth on the horizon. Let's see what the future holds!
Loading ...Reader Questions And Suggestions
Where do you think the median home price in America is heading in 2024? Why are there so many different home price indexes that say different percentage changes in price? Do you think home prices will down in 2024 or up after so many rate hikes?
If you believe real estate prices will rebound in 2024, as I do, you can dollar-cost average into private real estate funds offered by Fundrise. You can also buy public REITs and real estate ETFs as well. When real estate prices rebound, prices could recover quickly. Fundrise is a FS affiliate partner.
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After 40 years of rental real estate we are selling off partly because of estate planning.
It’s been an arduous ride with some tenants but exponential in wealth accumulation.
Then again the occasional tenant conflict has never surpassed the frustrations of working for some & dealing with then whims of co-workers.
We are now just holding 12% notes for fellow investor friends who are still doing flips, some of whom have been with us as borrowers for 15+ years. We have had one foreclosure in the 40 years we have been holding investment seller financing.
The lure of passive income negated my staying employed beyond my 40’s & we have never bothered with equities per se, in fact our 401(k)-solos are all invested in Real Estate.
My wife indoctrinated the kids with passive income pursuits that has paid off well for them all, in fact all graduated without student loans.
“ It’s been an arduous ride with some tenants but exponential in wealth accumulation.
Then again the occasional tenant conflict has never surpassed the frustrations of working for some & dealing with then whims of co-workers.”
Yes, the tradeoffs are important to determine. I was OK with owning physical rental properties in my 20s and 30s. In my mid-40s, I’m no longer as enthused. In fact, I’m finding it somewhat preferable to temporarily keep my old house unrented as I figure out what to do with it this spring.
Sam, that CDA vs USA chart looks alarming yet also telling. Can’t believe I’m saying this as an investor in Canada, but perhaps its the Canadian values that are out of whack and need normalizing as opposed to the US catching up to Canada’s insane valuations. I hope not, but I think thats the more likely scenario unfortunately…
I’ve been wondering when Canada’s housing prices would correct for 10 years. The numbers seem absurd.
You can make so much more money on average in America. House prices here in comparison are so cheap! Americans don’t realize how good we have it.
Related: Why Is U.S. Real Estate So Cheap?
Interesting post – Thank you.
You tend to discuss home buyers actions and reactions a lot.
How do Home sellers or potential home sellers needs/wants affect this market? I do not think you discuss this enough.
For example, you state you believe home buyers will enter market because they cannot put their lives on hold forever. Could not the same thing be said about home sellers not being able to put their lives on hold forever either? Thus these competing elements counteract each other?
We live in Portland OR area. We do not want to live here nor in this house anymore. It will go on market in 2024 and sell for a price that the “market” will bear as we we want out. “Market conditions” are not a big factor in this decision.
Talking to potential sellers I know around the country, (friends, colleagues, business associates) they want to move on. I think if there is even a smidgen of increased buyer activity, home inventory will dramatically increase. Sellers will think time is right to move. This will temper or even decrease prices a few percent. I do not think there is some > 10% movement though as that would be extreme
Sure, life goes on for sellers as well. Why are you selling and where would you go and buy?
I mostly talk about buying because I want to accumulate assets over my lifetime. It is one of the key ways to build wealth. Buy, hold, rent out, buy another property.
Same thing with buying stocks. Buy and hold and buy some more.
Selling causes economic waste due to commissions and taxes. So I try to avoid as much as possible.
For two years, we will move into an Oregon coastal rental we own. Living there of two yrs. allows us to capture some of the capital gains without paying tax. You have written about this concept before. It will mostly just be an address, as we plan to travel a lot over next few years.
We will then relo to midwest or SE USA where policy suits us better than this weirdo Left Coast mentality. So done with it.
I completely agree with you that buying and selling RE is very expensive and a wasteful use of scarce resources. This is one of the main reasons I have deleveraged my RE holdings and replaced them with a lot more Equity positions. Ignoring taxes, I can buy/sell a million dollars of stock with a click of a mouse and virtually no cost. Cannot do that in RE.
Plus the aforementioned Left Coast weirdness/bad policy make being a landlord difficult and make it harder to make money.
This is why I struggle a bit with your love of RE.
I have found Equity to be an easier and less “headachy” way to grow my NW.
My Magnificent Seven positions have grown at double digit rates and have never complained – unlike whiny renters who have to be hounded to pay their rent or worse, they trash the home.
keep up the good work, I enjoy reading your material and it makes me think.
Currently looking at new construction with an 18 month timeline for completion. Intrigued by the idea of having current home and the new construction appreciating at the same time after locking in the purchase price. Of course, also run the risk of having two depreciating assets as well. Would be nice to know if there isn’t much further to drop in NorCal. That said, I feel like new builds are always conservatively priced in the initial phases. Probably more concerned about the current home dropping than I am the new construction. New construction is 2M home, so not really impacted by rates as most buyers are coming in with cash from the Bay Area. Prices have already gone up 75-90K since November 2022. Rates don’t seem to be impacting the high end market. That said, not sure how much a future rate reduction will lead to appreciation of high end homes.
Does an election year play into this at all? Does anyone believe that factors can be manipulated by the powers that be during an election year (e.g., feds reducing interest rates quicker than expected leading up to the election)?
I would predict the markets will remain tight for the near term. Unlike in previous years where individuals would sell their homes to move to a larger house, this has become nearly impossible for many people who have very low interest mortgage rates. They cannot afford to purchase a large home simply because they would not even qualify to buy their present homes at current interest rates.
Just using a basic mortgage calculator one finds the following:
$800,000 loan
2.5% 3880/month
5% 5017/month
7% 6046/month
For someone who qualified for a $3880/month loan at 2.5%, today that same monthly payment would only get them $550,000 at 7%. How could they even consider moving?
Of course, there are some, like those in the Silicon Valley who can still afford mortgages even at these higher rates, but I suspect for most of the country this is simply not true.
Are the figures provided adjusted for inflation?
Inflation has drifted to ~3%, so a 1% increase in RE is -2% when adjusted for inflation.
I see inflation being flat for most, if not all, of 2024.
Did you ever pay Jim for that mortgage rates of 6-7% by the middle of 2023 bet you had?
I did! I donate $5000 to his charity.
Care to share your housing price forecast and why?
I don’t know, as somebody who purchased in 2007, and just purchased once again in 2022, I’m not convinced RE is the way to go.
Ad homen aside I could see a 20-40% drop on the horizon. It’s not a 2008 situation, but with inaffordability as it is I wouldn’t be surprised to see a 2008 style result as buyers have completely dried up, inventory is exploding, and the worsening economy will manifest forced sellers.
Furthermore, with cheap debt gone and demographics (family units specifically) collapsing at an alarming rate, I’m not entirely convinced RE will be a suitable means of building wealth within the next decade or so.
Of course I hope I’m wrong, and perhaps I’m jaded for having lost $70k on a house purchase I made 15 years ago, but I have to question if we’re hitting one of those economic turning points where assets being so large in value in addition to being expensive to borrow will cause a deflationary type event.
Anything is possible for sure. Let me average your forecast and I’ll put you down for a -30% median home price growth for 2024. And we can then revisit the forecast at the end of the year.
Out of curiosity, given you are so Barash on real estate, why did you buy a home? Thanks.
I had to sell my home due to a relocation. Ultimately where I moved is where I will likely retire and croak (outside Pittsburgh).
This is also one of the few places where fundamentals are more aligned, and owning costs less than renting.
The way I see it, if so little appreciation occurred, it’s likely not much depreciation will. Homes only appreciated around 15-20% since the start of the pandemic.
So I bit the bullet and bought since I figured this would be the last chance for cheap money, at least in my lifetime. It appears that may be the case, because we sure aren’t seeing 3% again anytime soon.
The masses will always conclude it makes more sense to buy housing where renting is more expensive than owning… but following the masses almost never gets you ahead. This housing “rule” (like all of them) is no exception. Owning is cheaper than renting in places where the land is near worthless and almost the entire investment is literally in a depreciating structure. You want to own where the land is where most of the value is and the structure is a small percentage. It’s a simple rule that oddly the vast majority never follow. They literally do the exact opposite because “the numbers make sense”.
This is very true. Many people do not realize that their house definitely does not appreciate. It falls apart little by little over time. The land is what drives long term appreciation. Having said that, a primary residence is not an investment, it is a place to live. You should factor the location in, but mostly in a sense of not settling for a location that is very suboptimal for you and your family. If you buy a house in the boonies (because that’s the only area you can afford) when you really should be living in the city or suburbs due to work, family, etc you are probably better off renting in your desired location and investing in equities or rental real estate.
“Perhaps I’m jaded for having lost $70k on a house purchase I made 15 years ago.”
Kelly, how is this possible? You must have really overpaid in ‘08!
You’d be surprised my friend. Certain areas had astronomical prices that not only dropped like a rock but took over a decade to recover.
I was one of those cases, paid $305k for a townhome and sold for $290k. When you consider the improvements and repairs I’d reckon $70k seems about right.
Great write up, Sam. I predict housing will flatten out this year but in the positive, likely between 0.5 – 1.0%. Personally, I think the country could use another 10% drop in prices, even though a large chunk of my net worth is wrapped up in real estate.
I’m particularly curious to see what happens to the costs of construction for new homes over the next year. In that realm, I have no idea.
Interesting read. I think the market will drop 5% or more as we head into a recession next year. All I keep hearing is that people are being laid off and the market is slow. I’m a commercial real estate appraiser and we are seeing the slow down happening on our end too. Work is slow, lending is slow, and people don’t want 7-8% interest rates when they were just at 3%. Honestly, I hope I’m wrong.
Commercial real estate developing is one of the toughest spots right now.
So for commercial real estate, another 5% drop seems highly plausible.
“It generates income, provides utility, is less volatile, is more easily understandable, can be improved upon, is more controllable, and is less efficient than stocks.”
Less, or more, efficient?
Less. The less efficient, the greater the opportunity to negotiate and use tactics to get a deal.
With stocks, you pay whatever immediate market price.
Ah! Okay, I understand your perspective now.
Thank you
Wow I’m impressed with the accuracy of your 2023 predictions! I laughed when I read your joke about JBREC. They were way off even with a huge team. Just goes to show how well you know your stuff Sam.
Sounds good to me on the 2024 predictions. I hope it will indeed be a positive year, which I expect it will be, and over 4% growth would make me one happy camper. Thanks for always providing so many solid insights around this time as we head into a new year, and all year round for that matter.