From interest rates to home demand, here's how the housing market will unfold in 2024, according to LendingTree

• LendingTree predicts 30-year fixed mortgage rates could drop to 6% in 2024, and possibly lower before 2025.
• Easing rates could help boost homebuyer demand, but challenges to affordability will persist.

Americans could see some moderate relief in the housing market in 2024 compared to last year, but affordability challenges will persist and activity will stay relatively sluggish, according to LendingTree.

In its new economic outlook, the group noted that housing remains "prohibitively expensive for many" and the economy is still facing headwinds including inflation, low personal savings rates, and high household debt.

"While a total collapse is unlikely and a recession may be avoidable, some Americans will still struggle to make ends meet in the face of relatively high rates and higher-than-ideal inflation," LendingTree senior economist Jacob Channel wrote in the note.

Here's what the real estate firm expects for the housing market over the next 12 months.

Mortgage rates and buyer demand

Mortgage rates hit multi-decade highs of about 8% in October, then proceeded to drop below 7% by December and ended the year at about 6.61%.

In LendingTree's view, mortgage rates should continue to stabilize this year, moving lower as the Federal Reserve eases monetary policy.

Rates on the most popular home loan could fall to 6% or even dip slightly below that going into 2025, LendingTree said. Lower rates, in turn, could help boost homebuyer demand, but affordability challenges will still keep many Americans sidelined.

"[E]ven if this year's housing market is more active than 2023's, it's unlikely to be anywhere close to as white-hot as it was during the height of the pandemic," Channel wrote.

Softening lock-in effect

In the last two years, homeowners have been unwilling to sell their homes because of the lower mortgage rates they secured previously. That meant a lower number of homes on the market, as well as fewer house hunters.

Looking ahead, falling mortgage rates could soften the lock-in effect that made owners reluctant to sell.

While a modest share of new homes should be made available, the market won't fully rebalance within the year.

"After all, while it should be easier for someone to sell their current home and move from a sub-5.00% mortgage rate to a rate of 6.00% or 6.50% than it would to move to a rate of nearly 8.00%, it'll still be far from ideal," Channel said.

No housing market crash

Low rates could spark some additional homebuying, but demand will ultimately stay muted and the market will "continue to move sluggishly," according to LendingTree.

However, that doesn't mean the US is heading for a 2008-style crash, Channel said. A separate November survey from LendingTree found that 41% of Americans at the time expected the housing market to crash in 2024.

"The housing market's strong fundamentals — like the nation's low mortgage delinquency rate — will likely help us avoid a major downturn," Channel said.

At the same time, LendingTree maintains that the housing market will stay "prohibitively expensive" for Americans, regardless of how rates move.