3 Housing Market Predictions for February 2024

If you've been struggling to buy a home for more months than you can count, you're not alone. The housing market has been extremely challenging for buyers over the past year. The combination of higher mortgage rates and limited inventory has backed buyers into a corner.

And sellers haven't had it easy, either. Sure, you can argue that they've had the upper hand. But many sellers today want to list their homes but can't due to not being able to afford a replacement home.

Will things get better in 2024? Maybe, as the year goes on. But here's a preview of what to expect in February. And spoiler alert: It's not necessarily great news.

1. Mortgage rates might drop -- but only modestly

In late 2023, mortgage rates were still sitting above 7%. Since the start of 2024, they've been edging downward, and as of mid-January, they were at 6.6% for a 30-year loan.

There's talk that the Federal Reserve will seek to cut interest rates in 2024. Once that happens, mortgage lenders might lower their rates. But for now, we shouldn't expect a notable drop in borrowing rates for home buyers in February. Rates could fall lower in the 6% range, but sub-6% mortgages are unlikely next month.

2. Inventory is likely to remain sluggish

As of late December, there were only 1 million available homes on the market, according to the National Association of Realtors (NAR). That might seem like a lot, but it represents a 3.2-month supply of available properties.

It can commonly take a six-month supply of homes to meet buyer demand in full. And because winter isn't a very popular time to list a home, if we were at a 3.2-month supply going into January, we're unlikely to see a large uptick in February.

Plus, let's remember that the main reason people aren't selling homes right now is to hang onto the competitive mortgage rates they locked in a few years ago. Until those come down, inventory is unlikely to increase very much.

3. Home prices will likely remain elevated

The NAR reported in January that as of December, the median existing U.S. home was selling for $389,800. Since real estate inventory is unlikely to budge, we're likely to see elevated home prices continue into February.

That might seem like good news for sellers. But it's not necessarily a positive thing. When sellers sell, they need a place to go. If they can't afford a new place, they'll be stuck in the same situation as buyers.

Don't be shocked if a February home purchase doesn't work out

You may be really eager to become a homeowner in February, especially if you've been house-hunting for a while. But unfortunately, February isn't exactly shaping up to be a great month to buy a home. And it's not necessarily a great time to sell one, either.

So what should you do? One option is to sit tight and wait until spring. Historically, it's when listings tend to reach their highest level of the year.

We shouldn't expect a huge burst of spring inventory this April or May due to the whole mortgage-rate issue mentioned earlier. But if rates continue to creep downward, that plus a modest influx of homes hitting the market could set a different stage for buyers later on in the year. So it's important to keep tabs on your local real estate market and not give up hope.