Housing affordability is the worst it’s been in decades. It will improve in 2024, but by only a ‘small step,’ chief economist says

Mortgage rates are expected to drop next year, but not enough to make sky-high housing costs more affordable for potential homebuyers looking to break into the market, according to 

“We do expect affordability to improve going into 2024. That’s a cornerstone of our housing market forecast,” chief economist Danielle Hale tells Fortune. “But it’s going to be a pretty small step in that direction.” 

One of the positives for affordability is that forecasts the 30-year fixed mortgage rate will drop to an average 6.8% in 2024, more than a percentage point lower than the 8% peak this fall. The rate currently stands at 7.15%, according to Mortgage News Daily, but that’s still almost three-quarters of a point higher than a year ago. 

“This means that affordability is still worse than one year ago, but we expect to see this trend change,” Hale says. 

In other market data, a shortage of homes for sale is easing slightly. The number of newly listed homes in November grew 7.5% from a year earlier, the first gain in 17 months and another sign that the frozen housing market could be starting to thaw, according to another new report from on Thursday.

While more listings are a “welcome gift for buyers” for now, according to, “they will have to pay dearly for them.” Median homes now cost $420,000, just 1% higher than the same time last year, data shows. But higher mortgage rates have increased the monthly cost of financing a home by 7.9%, or roughly $172 more per month compared with November 2022, according to

That’s the biggest increase in monthly home costs since started tracking this data in 2016, Hale said in a statement. Today, homebuyers must make about $118,000 to “comfortably” afford their housing payments, according to, Hale said in a statement. 

2024 housing market forecast

Overall, forecasts that while mortgage rates will average 6.8% in 2024, they’ll edge down to 6.5% by the end of next year. Meanwhile, home prices will drop 1.7%, it said, in contrast to what has been mostly annual gains since 2012. 

Despite the current market turbulence, home prices are actually up 6.2% year-over-year as of September 2023, Case-Shiller said this week. Case-Shiller is among the leading housing market forecasting tools, but its numbers lag a couple months. 

However, Craig J. Lazzara, managing director at S&P Dow Jones Indices, expects home prices to continue rising, but he didn’t predict what housing prices would do next year specifically. 

“Although this year’s increase in mortgage rates has surely suppressed the quantity of homes sold, the relative shortage of inventory for sale has been a solid support for prices,” he said in a statement. 

While expects housing affordability to improve slightly in 2024, the problematic lock-in effect is likely to persist, Hale says. Homeowners who locked-in their mortgages at sub-3% rates a couple of years ago have little to no motivation to sell now because they would end up buying homes with far higher monthly payments at current 7%-plus mortgage rates. A small decline to 6.8% is an improvement, but it may not move the needle enough to prompt current homeowners to finally sell.

“In the big picture, this is still higher for longer [rates],” Hale says, adding,: “We also think this means that the impact of higher mortgage rates, including the lock-in effect, are likely to continue to be a factor.”

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