3 Housing Market Predictions for January 2024

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What does the first month of the year have in store for home buyers? Read on to find out. 

If you’re someone who’s been trying to buy a home since the start of 2023, you may not be shocked to have arrived at the end of the year without being successful. The past 12 months have been downright torturous for would-be buyers. At this point, it’s best to look forward to 2024.

But will things change dramatically in January? Probably not. Here’s what the upcoming month could have in store.

1. Mortgage rates might fall — but only a bit

As of mid-December, the average 30-year mortgage rate was 6.95%, according to Freddie Mac. Seeing as how rates were stuck at well above 7% for much of 2023, a dip below 7% is an improvement. And mortgage borrowers may be in line for slightly lower interest rates in January.

However, mortgage lenders are unlikely to lower their rates to a notable degree next month. That could happen gradually during 2024, but buyers should generally expect mortgage rates to be pretty high at the start of the year.

2. Housing inventory is unlikely to increase

As of the end of November, there were only 1.13 million unsold housing units across the U.S. market, says the National Association of Realtors (NAR). That’s a 1.7% decline from the previous month, and it represents a 3.5-month supply of available homes.

That might seem like a decent supply of properties, but it typically takes a four- to six-month supply of homes to fully meet buyer demand. So all told, buyers shouldn’t expect a vast selection of homes to choose from in January.

However, because the winter months don’t tend to be a popular time to buy, you may fare pretty well if you opt to do your house hunting in January. Even if there’s not a lot of inventory to choose from, if you’re looking during a month when there’s not much competition, you may have an easier time getting an offer accepted without having to put out a number that’s well over a seller’s asking price.

3. Home prices will likely remain elevated

The NAR reports that in November, the median existing home sold for $387,600. That’s a 4% increase on a year-over-year basis. November was also the fifth month in a row where home sale prices rose on an annual basis.

Since there aren’t many homes on the market, sellers can get away with higher asking prices. You may have a little more wiggle room to pay more for a home if mortgage rates tick downward a bit more. But crunch your numbers before making an offer so you don’t end up taking on a home you can’t comfortably afford.

All told, your monthly housing costs, including your mortgage payments, homeowners insurance, and property taxes, should really not exceed 30% of your take-home income. Going beyond that point could put you at risk of falling behind on your bills.

Good luck trying to buy in January

January 2024 may not be the easiest month to buy a home. But the good news is that it shouldn’t be any worse than recent months. And if mortgage rates drop even more, it may end up being better.

If you find yourself struggling to find a home in January, remember that real estate inventory tends to pick up in the spring. So before you rush to make an offer on a so-so home because there aren’t enough affordable choices, recognize that sitting tight for a few months might work to your advantage.

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