Home Prices Rose Almost 5% in October. When Will Those Increases Stop?

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Higher home prices continue to cause issues for buyers. Read on to see if the market is likely to improve in 2024. 

It’s been a major struggle to navigate the housing market this year. Buyers are dealing with the double whammy of expensive mortgages and stubbornly high home prices.

In October, single-family home prices rose 4.7% on an annual basis, according to new data from CoreLogic. The largest price increases came in the Northeast, with growth ranging from 10.3% in Connecticut to 9.3% in New Hampshire and Maine.

If you’re having a hard time buying a home because you can’t afford to spend more on your purchase price and pay a higher rate of interest to your mortgage lender, you’re not alone. Unfortunately, it may be a while until we see home prices come down.

Why home prices may not decrease in 2024

You’d think that with mortgage rates being so high, home buyers would be exiting the real estate market in short order, thereby driving home prices downward. But the reason that hasn’t happened is that there’s a glaring lack of real estate inventory on a national level. And because of that low supply, there’s still enough buyer demand to allow for home price growth.

The National Association of Realtors reports that as of the end of October, there was only a 3.6-month supply of available homes on the market. It can easily take a six-month supply to meet buyer demand in full. So as long as supply remains short, today’s higher prices are likely to hold steady.

Of course, that raises the question — why is supply so low? And that ties into mortgage rates.

Many existing homeowners are sitting on much lower interest rates on their mortgages than the rates being offered today. As such, a lot of people pretty much refuse to sell until mortgage rates start to drop.

If inflation continues to cool in 2024 and the Federal Reserve starts to cut rates, then we could see mortgage rates start to come down. From there, more people might be motivated to sell, and inventory numbers could start to rise, leading to a gradual drop in home prices. But all of this hinges on a very big “if.”

Will you be able to afford a home purchase in 2024?

Perhaps a home purchase just wasn’t in the cards for you this year. But will things change in 2024? It depends on what your income looks like and how much money you have saved.

As a general rule, you should aim to keep your housing costs to 30% of your take-home pay or less. Those costs should include any recurring expense that comes along with your mortgage, like property taxes and homeowners insurance.

If you’re unable to afford a home right now based on that formula, then chances are, you’ll continue to struggle in early 2024, assuming your income isn’t really changing. But let’s say you manage to get a much better-paying job in mid-2024. Between that and spending the next several months saving more for a down payment, you may find that becoming a homeowner is doable.

All told, it’s hard to say when homes will stop gaining value and prices will start dropping instead. There’s a fair chance that will happen at some point in 2024, but we unfortunately can’t bank on that happening, either.

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