Real Estate Trends and Forecasts: What to Expect in the Next 5 Years

The real estate market has been on a rollercoaster ride over the last few years, with mortgage rates reaching their highest level in more than two decades. From a low of 3 percent in August 2021, the average rate for a 30-year mortgage more than doubled to 8 percent by October 2023. As of April 2024, rates were hovering around 7 percent, leading to a slowdown in buying activity.

Despite the high mortgage rates, home prices remain unaffordable in many parts of the U.S. The median existing-home sale price in February 2024 was $384,500, up 5.7 percent year-over-year. Inventory remains low, with only a 2.9-month supply of unsold existing homes in February.

Looking ahead, industry experts have provided forecasts for the next five years in the real estate market. Lawrence Yun, NAR’s chief economist, predicts that mortgage rates will remain around 7 percent for most of 2024 but will eventually return to 5.5 or 6 percent within two years. He also expects a gradual increase in home prices, with a total appreciation of 15 to 25 percent over the next five years.

While there are concerns about a potential housing market crash, Yun believes that it is unlikely due to the lack of oversupply in the market. He predicts a gradual increase in sales over the next few years, reaching an annual rate of 6 million units by 2027.

As for the type of homes being built, Yun expects the suburban market to remain strong, with growth in areas like the Carolinas, Florida, Texas, and Tennessee. However, he also predicts a stabilization in the growth of multi-family homes due to high mortgage rates and inflationary building material prices.

Overall, the real estate market is expected to remain in favor of sellers in the near future, but a shift towards a more balanced market is anticipated within the next five years. With careful planning and preparation, potential homebuyers can position themselves to take advantage of the market when the time is right.