Gas, food and housing: How will prices change over the next year?

(NewsNation) — Inflation slowed in 2023 and with the start of a new year, most Americans will be wondering the same thing: where do we go from here?

Economists are cautiously optimistic a “soft landing” is in reach after prices started accelerating in the spring of 2021.

In 2024, inflation is expected to nearly hit the Federal Reserve’s 2% target rate, though that will likely come with slower economic growth, the nonpartisan Congressional Budget Office said in December.

While widespread deflation is unlikely and probably not desirable, some prices are expected to fall over the next year.

Here’s how gas, food and housing costs could change in 2024.

Gas prices expected to fall

After two years of above-average gas prices, Americans can expect some relief at the pump in 2024, according to a recent analysis by GasBuddy.

The yearly national average is projected to drop from $3.51 per gallon in 2023 to $3.38 in 2024, the company said.

That forecast marks a continuation of a generally positive trend after commuters endured record-high gas prices in the summer of 2022.

In November, a gallon of regular cost $3.50 on average, down from $5.06 in June 2022, according to the Consumer Price Index (CPI).

Drivers in some West Coast cities could briefly see prices spike above $6 per gallon in 2024 but GasBuddy expects prices to peak near $4 per gallon in most major U.S. cities. Those highs are expected at the top of the summer driving season in May.

“The global refining picture continues to improve, providing more capacity and peace of mind that record-setting prices will stay away from the pump in 2024,” Patrick De Haan, head of petroleum analysis for GasBuddy said in a statement.

Diesel prices are also projected to “fall incrementally from 2023,” peaking at $4.13 per gallon in March 2024, the company said.  

Food inflation should slow down

When it comes to food costs, prices are expected to ease, particularly at the grocery store.

Overall, food prices are projected to increase by 1.2% in 2024, according to the latest forecast from the U.S. Department of Agriculture (USDA). That’s significantly slower than the 5.8% rise in 2023.

The outlook is even better at the supermarket, where grocery prices are projected to decrease by 0.6% in the upcoming year.

Some items already cost less today than they did just one year ago.

A dozen eggs cost $2.14 in November, down from $4.82 last January when a nationwide bird flu outbreak sent prices skyrocketing. Egg prices are predicted to drop even further in 2024.

Milk is also cheaper than a year ago and is expected to decrease over the next year, according to the USDA forecast.

But the shopping cart is just part of the equation. The other component, restaurant prices, are predicted to rise by 4.9% in 2024. That’s faster than the forecasted rate for groceries but better than the 7.1% predicted rate for 2023.

Real estate outlook is murky

After reaching 8% in October, the average long-term U.S. mortgage rate has dropped below 7% in recent weeks. That’s promising news for would-be homebuyers but it’s not clear how that will impact other factors that have contributed to a perfect storm over the past year.

On the one hand, lower rates may drive more buying and selling activity, which could help alleviate an ongoing inventory shortage. On the other, an uptick in demand would make an already competitive market even more so, pushing prices even higher.

Lawrence Yun, the chief economist at the National Realtors Association (NAR), predicts sales of existing homes will jump by 13.5% compared to 2023.

“Metro markets in southern states will likely outperform others due to faster job increases, while markets in the Midwest will experience gains from being in the most affordable region,” Yun said in a recent statement.

Yun expects the median home price will keep rising in 2024, reaching $389,500 — up 0.9% from 2023.

A separate analysis by Realtor.com expects home prices to dip 1.7% in 2024.

In specific areas, like Austin, Texas, and St. Louis, Missouri, the decline in prices is projected to be even steeper, according to the forecast.

Low inventory will remain a challenge and Realtor.com expects the supply of existing homes for sale to drop by up to 14%.

One bright spot: new home construction has jumped, though it remains to be seen how much that may or may not ease the supply pressure.