Homebuyers faced considerable challenges in the real estate market this year, contending with soaring home prices, rising mortgage rates, and limited housing inventory. As 2023 comes to a close, housing experts are now analyzing the prospects for 2024 and providing their forecasts.

According to Daryl Fairweather, chief economist at Redfin, home prices are expected to remain flat or even experience a modest decline of around 1% in 2024. Realtor.com's forecast is slightly more pessimistic, projecting a decline of 1.7% in home prices for the coming year.

A recent report from the National Association of Realtors revealed that the median price of a typical home in the United States reached an all-time high of $410,200 in June. Although prices have slightly eased since then, with the median price falling to $379,100 in October, it still represents a significant 40% jump compared to October 2019, just before the onset of the pandemic.

The surge in real estate prices during the pandemic can be attributed to increased demand from millennials establishing their own families and baby boomers forming new households post-divorce or due to bereavement. Furthermore, the low mortgage rates prevalent in the early years of the crisis fueled a buying frenzy.

However, mortgage rates have been steadily climbing since 2022, when the Federal Reserve began raising its benchmark rate in response to the highest inflation seen in four decades. As of October this year, the typical rate for a 30-year loan exceeded 8%, a significant increase from the 6.4% observed in January.

Interestingly, a growing number of economists now believe that the Federal Reserve has concluded its rate-hiking spree and may even commence rate cuts in response to cooling inflation. Bank of America estimates that by mid-2024, the Fed could start decreasing its benchmark rate. Consequently, mortgage lenders may follow suit, potentially bringing rates down to as low as 6.5% next year, as predicted by Realtor.com.

Despite the potential relief in mortgage rates, experts do not anticipate a notable improvement in the availability of homes for sale in 2024. Builders would need to achieve remarkable results, while a surge in homeowners willing to sell their properties would be necessary. Many homeowners have been reluctant to sell this year due to refinancing or purchasing their properties during the initial stages of the pandemic, benefiting from historically low mortgage rates of around 3%.

Even with mortgage rates falling to the 6%-range, homeowners would still face higher financing costs. As a result, it appears unlikely that a flood of properties will enter the market in 2024, indicating that housing inventory may remain tight.

Realtor.com expects housing inventory to decline by 14% next year, partly due to homeowners choosing to stay put. Chief Economist Danielle Hale predicts that homeowners will only sell their properties if absolutely necessary, such as for job changes, family situations, or downsizing to more affordable markets. Homebuyers will likely be focused on markets where they can maximize their budgets and find homes that better suit their needs.

As homebuyers eagerly await the turn of the year, they can expect relatively stable or slightly lower home prices in 2024. However, the limited inventory and the hesitancy of homeowners to sell may continue to pose challenges, requiring buyers to carefully navigate the real estate landscape in the coming year.

(Note: The article is generated using the information provided and may not reflect current market conditions or expert opinions.)