As 2024 draws to a close, the real estate market is facing a mix of challenges and opportunities that will shape the final months of the year. Typically, the housing market sees a slowdown in the latter part of the year, with fewer transactions and more cautious buyer behavior due to the holiday season and colder weather. However, economic factors such as high interest rates, inflation, and the lingering effects of the ongoing inventory shortage may result in a unique end-of-year market.
This article will explore what we can expect for the real estate market in the final months of 2024, focusing on key areas like California, Florida, and Texas, where trends are often more pronounced. We will look at sales volume, median home prices, inventory levels, and how these factors are influencing buyer behavior and overall market dynamics as we approach the end of the year.
Rising Interest Rates: Continuing to Shape Buyer Behavior
Interest rates have remained a dominant factor in the housing market throughout 2024, with the Federal Reserve’s decisions continuing to keep mortgage rates around 7% for a 30-year fixed loan. As a result, the affordability challenge persists for many buyers. While rates have held steady, they continue to put pressure on buyer purchasing power, especially for those looking at higher-priced homes in competitive markets.
As we move into the final months of 2024, interest rates are unlikely to decline significantly, meaning that potential buyers may hold off on purchases as they wait for more favorable conditions in the future. However, for many buyers, the urgency to find a home before the end of the year could lead to a slight uptick in activity as individuals look to secure properties before the market further cools down. The holiday season traditionally brings fewer buyers into the market, but this year, some buyers who have been sitting on the sidelines due to high rates might choose to act now, while sellers who are motivated may look to close deals before the year ends for tax purposes or personal reasons.
Inventory Levels: A Continued Struggle for Balance
Inventory remains a key challenge as we head into the fall and winter months. Throughout 2024, inventory levels have remained low, with many homeowners hesitant to sell due to the high mortgage rates they would face if they were to purchase a new home. This reluctance is expected to continue, meaning that inventory will likely stay constrained, particularly in regions like California, Florida, and Texas, where the demand for housing is strong and the supply has long struggled to keep up.
In California, inventory levels have remained particularly tight, especially in areas like Los Angeles, San Francisco, and San Diego, where high costs of living and limited space have compounded the shortage. Despite the seasonal slowdown, sellers in these markets may still be able to command competitive offers, particularly if they price their homes correctly.
In Florida, the market remains buoyed by migration from higher-cost states, but inventory has been insufficient to meet demand, leading to sustained price growth in cities like Miami, Tampa, and Orlando. As the holidays approach, fewer listings are likely to hit the market, further exacerbating the inventory crunch, especially for those seeking affordable homes.
Texas, with cities like Austin, Dallas, and Houston, continues to see relatively strong demand, but inventory is also limited in many areas, especially in suburban markets where housing is more affordable. As more buyers seek homes outside major city centers due to rising rates and the ongoing work-from-home trend, inventory constraints are likely to become even more pronounced as 2024 winds down.
As we head toward the year’s end, the ongoing inventory shortage will keep competition fierce for the limited homes available, especially in high-demand areas. Sellers in these regions will likely have an advantage, even if buyer activity slows.
Home Prices and Sales Volume: Stabilizing but Competitive
Despite the ongoing challenges created by rising interest rates and low inventory, home prices have remained relatively steady throughout much of 2024, with moderate price increases in some regions and price stabilization in others. Nationally, home prices have been rising at a slower pace compared to the previous years, but they still reflect a steady demand for housing, especially in areas where inventory is scarce.
In California, home prices are expected to rise modestly as demand remains relatively stable in markets like San Diego and Sacramento. However, in cities like San Francisco and Los Angeles, the price growth will likely be more restrained, especially in the higher-end segments, due to ongoing affordability concerns. In contrast, more affordable inland areas of California may see continued upward pressure on prices as buyers seek more budget-friendly options.
Florida’s market remains robust, with ongoing demand from out-of-state buyers and retirees. Cities like Miami and Tampa are seeing continued price increases, though at a slower pace compared to the early months of 2024. The expected seasonal dip in transactions in the final quarter of 2024 may slightly cool the market, but prices are expected to remain relatively stable as the supply-demand imbalance persists.
In Texas, the housing market is expected to remain active, especially in suburban areas. Cities like Austin and Dallas continue to see demand from both buyers and investors, despite higher borrowing costs. Home prices in these cities are projected to increase, but at a slower pace, with a greater emphasis on affordability as buyers look for homes outside of the city centers.
Sales volume, which has been slower in 2024 due to higher rates, is expected to dip further in the final quarter. Historically, the fall market experiences a slowdown in transactions as many buyers and sellers take a step back during the holiday season. However, regions with limited inventory may see continued demand as buyers still compete for homes, particularly in markets like Texas and Florida.
What to Expect for the Final Quarter of 2024
As we approach the end of 2024, the market is likely to experience a typical seasonal slowdown, with fewer buyers actively looking for homes. However, the slowdown may be more pronounced than usual due to the ongoing affordability challenges, high mortgage rates, and inventory constraints. While these factors will likely dampen some buyer enthusiasm, the market will still remain competitive in high-demand regions.
Sellers may find that competition is lighter, but they will still need to adjust their pricing expectations, especially as we move further into the fall. Motivated sellers looking to close before the end of the year may see success, particularly in areas where supply is tight. On the other hand, some sellers might choose to wait until the new year to relist their homes, hoping for a more favorable market with lower rates or more buyer activity.
Mortgage lenders will continue to offer solutions like adjustable-rate mortgages or temporary buy-downs to help buyers navigate the high-rate environment. Real estate agents will also play a key role in managing buyer and seller expectations as the market slows down, ensuring that deals still close in a more cautious environment.
Conclusion: A Competitive End to 2024
As we enter the final months of 2024, the real estate market is poised for a typical seasonal slowdown, but lingering affordability issues, inventory shortages, and high mortgage rates will keep the market competitive in many regions. While the number of transactions is expected to decrease, demand in markets like California, Florida, and Texas will remain strong due to limited housing supply. Buyers will need to navigate a cautious market, while sellers may still find opportunities, particularly if they price their homes strategically. As the year winds down, both buyers and sellers will need to adapt to the ongoing economic conditions, with an eye toward a potentially more favorable market in 2025.
