It's quite an understatement that the US real estate market has been on a hair-raising rollercoaster ride for some time now. Beyond the catchy news headlines and obscure politics, however, every seller, (potential) buyer, and investor got a first-hand experience of how the housing market came to a screeching halt. 

Today, we can declare that the former heavyweight fighter is on the ground. Yet, everyone's favorite boxer, Rocky, didn't stay down for good, either. Can the US real estate market follow in his footsteps? Let's investigate the chances of a glorious market comeback in 2024!

Fighting the odds: reliable market information is still gold.

Human ingenuity shows under pressure. Despite the ongoing "attack" called global inflation, some brave freedom fighters continue to hope. They buy and invest, and more often than you'd think, they make a fortune in the meantime. What's their secret? 

It's access to reliable housing market information and excellent negotiation tactics. They realized working solo would get them nowhere. Instead, they reached out to real estate agents for a more comprehensive market know-how.

Who's to blame for the fall? 

Our prizefighter has endured some painful punches since the pandemic. Rising interest rates, an acute housing shortage, pricy building materials, and property prices reaching unaffordable heights are some of the reasons why the American real estate market has received the long count. Nonetheless, the market is too essential an economic element to be knocked out for too long. 

Can we be optimistic about the future based on real estate market predictions for 2024? Sure, we can! The market is in a training session, preparing for its grand comeback. Let's look at the current state of affairs!

Home sales and prices in Q1 2024

The narrative around home sales and prices feels like a mixed bag. Sales have been dipping. For this reason, potential buyers and sellers sit on the edge of their seats. On the other hand, prices have been as unpredictable as the weather, with some areas seeing slight decreases and others holding steady. 

CNN reported that homebuyers were returning to the market in February 2024 as the number of existing home sales increased by about 9.5 percent since the last month. Thus, approximately 4.4 million units were sold. Single-family homes, condos, and townhomes are still the trendiest real estate nationwide.

How about home prices? Redfin reported that the median sale property price dropped about one percent (the first time since 2013), reaching $386,000 in February. Predictions are cautious: the housing demand has been gradually increasing, Lawrence Yun, NAR's economics added. The explanation is that the US population has grown, a generation of younger buyers (Gen Z) joined the arena, and the job market is experiencing an upheaval. 

Are new homes trending?

Here comes another twist! According to Fox Business, new property sales (about 13 percent of all home sales) dropped in Q1 2024. This fall largely contributed to prices decreasing (the lowest in two years!), reaching a median of $400,500. Analysts believe the rising mortgage rates - from 6.8 to 7 percent- (dragged down by a chronic housing crisis) triggered the present situation. 

Still, Reuters is optimistic about the sale of new homes. In their estimate, they will grow from a rate of 662,000 units (sold in February) to a rate of 675,000 in Q2 2024.

Newly built properties can be the proper response to the housing crisis. Did you know the American real estate market still needs over one million units to meet the number of households? The solution? Reforming zoning rules! Thus, we can cut building costs and expedite the process, like they did in Minneapolis, Minnesota.

Can the rental market put up a decent fight?

It's worth noting that the American rental market has also substantially increased price-wise. Zillow reported that the average US rent grew 30 percent since the pre-pandemic "golden years." February 2024 brought another hike of 3.5 percent, reaching a median rent of $1,959 for a two-bedroom apartment. Some of the most extensive metro areas affected by skyrocketing rents are Providence, RI, with an 8.1 percent increase; Cleveland, Ohio (+6.9 percent); and Louisville, Ky.(+6.7 percent). 

However, the current increase can only last for a short time. Did you know that half of American tenants can't afford to pay rent (source: CNN)? The apartment construction industry has stepped on the gas lately. Rental prices will cool down, but unfortunately, not spectacularly. Renters must hang on tight, at least until 2025.

Are interest rates the source of all evil?

If there's one thing that's been the talk of the town, it's interest rates. They've climbed up, creating a pickle for buyers. Higher rates mean higher monthly payments, causing some to pause their home-buying dreams.

Track the Fed's interest rate hikes with us!

During the pandemic, the US government lowered interest rates (1-1.25 percent) to relaunch the dying economy and combat massive unemployment. Many buyers benefitted from generous interest rates, which they invested (smartly) in purchasing properties. 

However, inflation and recession crossed their plans. Thus, the Fed was forced to raise interest rates again on March 16, 2022, to 0.25–0.50 percent. During the last two years, the central bank hiked interest rates 11 times more, reaching 5.25- 5.5 percent as of March 2024! In addition, the interest rate climbed to 6.74 percent for a 30-year mortgage.

Is there light at the end of the tunnel?

No wonder the real estate market contracted by the end of 2023. Most homeowners wouldn't exchange a favorable mortgage rate for a higher one, which would have happened if they had sold back then. A stagnating housing market will do no good for anyone. 

Interest rates can influence buyer enthusiasm in the long term. If they start to stabilize or even dip, it could be the green light many buyers are waiting for. Fingers crossed that policymakers can find the sweet spot encouraging buying without overheating the market. To shake things up, the Federal Reserve must first adjust interest rates to more appealing levels. According to NPR, the Fed promised three rate cuts in 2024, but concrete numbers remained obscure.

Let's wrap this up!

There's cautious optimism in the air. With increasing home constructions, potential stabilization of interest rates, and the balancing act of supply and demand, the market has a fighting chance to rebound. Based on prudent estimates, home values will likely drop by 5-10 percent by the end of the current year. The US real estate market has the stamina and grim determination to pick itself up from the ground and start anew on the path to revival. 

The market can surprise us when least expected. So, keep an eye out, stay informed, and who knows? We might just witness the market returning to its former glory, one step at a time.