2023 was a year characterized by slow home sales activity, rising interest rates, and inventory constraints. Let’s look at where we expect the housing market to be headed this year.

1. Home sales activity is likely to rebound from 2023 levels with an expected boost from lower mortgage rates.

The Federal Reserve has kept its target federal funds rate unchanged at three consecutive meetings since July 2023. The market anticipates the Federal Reserve to lower the federal funds rate in 2024. This is expected to support the downward trajectory that mortgage rates have been on since November 2023. Lower mortgage rates will renew the interest of potential home buyers who were discouraged by the high interest rates throughout most of 2023. This will likely spur housing market activity with multiple interested buyers bidding on available houses and will likely cause homes to sell faster. Overall, 2024 is expected to see a much-needed respite from the sluggish home sales numbers of 2023, although overall, sales volume is still likely to remain below average when compared to recent years.

2. New construction activity will see a slowdown in the multifamily sector, but an upward trend is expected in single-family housing construction.

In 2023, inventory levels were dampened due to the prevalent lock-in effect wherein existing homeowners who had secured very favorable interest rates in 2020 and 2021 have been hesitant to sell their homes and lose those low rates. But the relatively slow pace of new housing construction in 2023 also kept inventory levels low, as homebuilders also felt the impacts of higher interest rates. In 2024, we expect to see more new homes, especially in the single-family housing space, as well as townhomes in some local markets around the commonwealth. While new construction over the past couple of years in Virginia was concentrated in the multifamily housing sector, going forward this year, single-family housing construction is expected to increase from last year, while multifamily is projected to slow down considerably.

3. Home prices will continue to climb but at a slower pace in most markets around Virginia, which is a continuation of the 2023 market pattern as the supply-demand imbalance remains a factor in the housing market.

Across the commonwealth, tight inventory conditions led to higher median home price growth in 2023, but as interest rates rose last year, the pace of price growth slowed down from 2022. With more inventory expected to become available in the market this year, the upward pressure on prices from the supply side will likely continue to soften. But even as the pressure on home prices softens, with more potential buyers entering the market, the higher demand—which will likely lead to bidding wars on listed homes—will keep prices stable and trending up. Altogether, this leads us to expect an upward, albeit slower, trajectory in terms of home price growth.

For more information on housing, demographic and economic trends in Virginia, be sure to check out Virginia REALTORS^® other Economic Insights blogs and our Data page.