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Heading into the busier real estate season of 2024, many are wondering what’s up with the housing market. It’s been a wild ride for buyers and sellers, each facing their own unique set of challenges. 

Whether you’re thinking of buying a new place or selling your current one, we’ve got you covered. Below, we’ll dive into what the experts are predicting for this year and provide you with our two cents as well.

Mortgage Interest Rates 2024

As we venture further into 2024, many individuals are keenly observing the mortgage interest rate trends, particularly those contemplating entering the housing market. Understanding the trajectory of these rates is crucial for making informed decisions in what appears to be a fluctuating economic landscape. Here’s a breakdown of the current situation and what it might mean for mortgage interest rates moving forward:

A Peak in October 2023?: In the past few months, rates have begun to decrease from what may have been the highest peak in 25 years due to a combination of factors, namely a cooling job market and progress in the fight against inflation. This shift has led the Federal Reserve to pause increases in the federal funds rate, with potential cuts hinted for 2024.1

Key Correlation: Mortgage rates, which tend to follow 10-year Treasury yields, have seen a decline. Freddie Mac reported in December that the average rate for a 30-year fixed-rate mortgage fell below 7% for the first time since last summer, indicating a potential trend for the coming year.2

Expert Calls For Decline: Expert forecasts suggest a diverse outlook for mortgage rates from 2024 to 2025. Predictions for 2024 range from 6.1% by Fannie Mae and the Mortgage Bankers Association, with a slight dip expected by 2025 to approximately 5.5% and 5.6%. The National Association of Home Builders foresees a higher rate of 6.77% for 2024, decreasing to 5.79% in 2025. The National Association of Realtors predicts a decrease from 6.5% in 2024 to 6.1% in 2025. Realtor.com expects a rate of 6.8% in 2024, dropping to 6.5% by year-end, while Wells Fargo estimates a decrease from 6.45% in 2024 to 5.76% in 2025, reflecting a move towards lower borrowing costs over the period.3

Our Thoughts: The peak in mortgage rates above 8% just six months ago paralyzed home buying, home selling, and new loans like HELOCs, 2nd mortgages or cash-out refinancing. Demand shrunk to almost zero. But even when rates were at historic lows as recently as 2022, home prices were sky-rocketing and construction costs were too. Home buyers found it hard to shop, and home sellers were worried about the price of their next home if they were to leave. But what was very prevalent was refinancing activity.  It has been weird seeing parallels in behavior in both low- and high-interest rate environments. That said, the “financing” of loans with real estate as collateral is still ready for a deep thaw. We believe the pace of rates getting lower will drive whether or not it is a quick or drawn out thawing of financing activities. 

Home Inventory

As we go further into 2024, the topic of home inventory is increasingly becoming a focal point for potential homebuyers, sellers, and market analysts alike. The current state of housing supply has been notably constrained, creating a competitive environment for those looking to find their place in the housing market. Here’s a closer look at the factors influencing home inventory and what we can expect as we move into the next year:

Tight Housing Supply: Many homeowners, having secured low interest rates in previous years, are choosing to hold onto their properties despite high market prices. This reluctance to sell has contributed to a tight housing market, particularly challenging for buyers seeking affordable options.

Optimism Among Builders: The construction sector, which has faced its share of challenges, is showing signs of optimism. The NAHB/Wells Fargo Housing Market Index, a gauge of builder sentiment, has recently improved, indicating a growing confidence among builders about the future. This positive shift is supported by easing mortgage rates and improving building conditions.4

Increase in Building Permits: There’s encouraging news from the U.S. Census Bureau and Department of Housing and Urban Development, with new permits for single-family homes rising for the 11th consecutive month. This trend suggests an impending increase in the supply of new homes, potentially alleviating some of the current market constraints.4

Any New Inventory Will Be Easily Absorbed: Lawrence Yun, Chief Economist at the National Association of Realtors, highlights a significant shortfall in housing inventory, noting the market’s capacity to absorb even a 100% increase in listings . For 2024, Yun expects a slight rise in housing supply, attributed to more homeowners listing their properties and a rise in new construction. Although a dramatic surge in listings or construction boom is currently unlikely, Yun’s perspective offers a cautiously optimistic view for an improved inventory landscape next year, potentially easing the competitive pressure for buyers.5

Our Thoughts: We think there is a ton of pent up demand for housing of all shapes and sizes – especially affordable housing. A lack of inventory has been a persistent issue since before the pandemic. Each year that passes without it being addressed, we believe the momentum for expansion of inventory will grow. But will there be a pendulum shift where inventory floods the market? Probably not. This is good for existing homeowners and their property values. It is not good for new homebuyers or those looking for more affordable housing. It will likely take some sort of recession to knock home prices down to “affordable.” We think those who can afford to make their move shouldn’t wait for supply/demand conditions to knock prices down. You might just need to take the step and move on with your life.  

Home Prices

The question of what will happen with home prices is also on many people’s minds. Whether you’re a prospective buyer, seller, or simply keeping an eye on the market, understanding the potential shifts in home prices is key. Let’s simplify the insights from industry experts and what they predict for the housing market in the upcoming year:

Possible Slight Decrease: Ellen Zentner, a chief economist from Morgan Stanley, anticipates a minor decrease in home prices for 2024. The early part of the year may see slow sales, but an improvement in affordability could boost the market in the latter half, potentially leading to a decrease in prices as supply tries to meet demand.6

Regional Sales and Price Variations Expected: The real estate market in 2024 anticipates a modest national sales increase with stark regional differences. Realtor.com’s Danielle Hale forecasts slight overall growth but significant gains in affordable Midwest and Northeast areas, like Toledo and Rochester, and a rebound in Southern California due to lower mortgage rates. This scenario suggests a mixed market with potential sales and price rises in both budget-friendly and rebounding areas. With a 4% rise in median existing-home prices as of November 2023, this upward trend is expected to continue across all U.S. regions into 2024.7

Prices Still Likely To Remain High: Due to the continued problem of low inventory, it’s likely home prices won’t decrease but so much (if at all). Again, even if home inventory increased drastically, the present demand could more than absorb the new supply. 

Will 2024 Continue To Be A Seller’s Market?

Given the current landscape, where the inventory of available homes hasn’t kept pace with demand, it’s unlikely we’ll see a shift towards a buyer’s market in the near future. While the market has cooled somewhat from its previous intensity, allowing buyers slightly more breathing room and a broader selection of options, the balance has not tipped far enough to alter the fundamental seller’s advantage that has characterized recent years.

On the flip side, the enduring strength of a seller’s market is evident, driven by a demand for homes that outstrips supply. Those looking to sell their property in 2024 can anticipate a relatively swift sales process, with the potential to secure offers that closely align with their asking prices, provided those prices are set in accordance with the prevailing market conditions. 

Our Thoughts: As of the spring of 2024, we see it as more balanced, where on the aggregate, sellers and buyers each have power in this market. Sellers probably have the slight upper-hand, but buyers won’t have outrageous bidding wars and can still negotiate for contingencies. All real estate is local however, so while the aggregate numbers may show flat prices and modest inventory expansion, that doesn’t mean a seller’s listing will go smoothly, or that buyers won’t have to compete. 

Will The Housing Market Crash In 2024?

Speculation about a potential housing market crash in 2024 has been making the rounds, fueled by the rapid increase in home prices over recent years. Some observers point to these trends as signs of an impending bubble burst that could plunge the economy into turmoil reminiscent of the Great Recession.

Yet, a closer look at the underlying factors suggests that a crash is not necessarily on the horizon for 2024. A key element stabilizing the market is the persistent mismatch between the supply of homes and buyer demand. Again, the simple truth is, there aren’t enough homes available to satisfy the wants and needs of prospective buyers, which has helped to keep home prices relatively stable.

Our Thoughts: Bubbles don’t just burst out of nothing. Something has to cause it. The last “great recession” was brought about in part because of irresponsible behavior in real estate transactions. But on this side of that time period, are we doomed to make the same mistake twice? Not likely. We call this confirmation bias – when we believe that something will occur simply because we are familiar with what had happened in the past. What could cause a major drop in housing demand? Huge unemployment paired and economic chaos causes home prices to go down. Watch for major unemployment events nationwide, that is when I’d be worried about the home price stability. 

Should I Buy A House In 2024?

In 2024, the prospect of buying a house may seem daunting for many, especially with home prices remaining high and the likely continuation of a seller’s market. This environment can understandably discourage potential buyers from taking the leap into homeownership. 

However, it’s important to remember that the decision to buy a home should not be based solely on market conditions. There are several other critical factors to consider that may outweigh current market trends and make purchasing a home the right decision for you. These include, but are certainly not limited to:

Lifestyle Changes: Are you expecting a change in your family size, or do you need more space to accommodate a home office or other new necessities?

Current Financial Strength: Is your balance sheet strong enough to weather a storm? Real estate is not scary when you can easily afford it. Your income, liquidity, circumstance, or time commitment might render the outside world irrelevant when it comes to your potential move. 

Job Stability: How reliable is your paycheck(s), and thus, your balance sheet. Are they going to lay off everyone but you – or is your job recession-proof? 

Employment Opportunities: Have you been offered a job that requires relocation, or are you seeking employment in a region with more robust job prospects?

Our Thoughts: Moments of pause are healthy – it means you care about not making mistakes. But being paralyzed by cautious feelings or fear can harm you in many ways too. Your situation is different from that other person or what that article says about the “market.” There are those people who cannot afford to do this in today’s environment. And then there are those who can, and just need to get over the hump and get moving. Nothing makes you more confident than engaging the problem. Talk with a financial advisor, a realtor, and a mortgage professional. Get in there. And at the end of the day, it is OK to NOT move forward. But do your due diligence first before you kick the can down the road. 

Speak To An Advisor That Specializes In Real Estate

At Crafted Finance, we pride ourselves on being real estate problem solvers, dedicated to assisting homeowners, income property owners, and real estate investors navigate the complexities of the market. The 2024 real estate landscape presents a unique set of challenges, with each buyer and seller facing distinct hurdles in a market that remains unpredictable. 

Whether it’s deciphering mortgage interest rate trends, understanding shifts in home inventory and prices, or making sense of regional market variations, we’re here to offer our expertise and guidance. The 2024 market is not just another year in real estate; it’s a period filled with opportunities and obstacles that require informed decision-making. 

We understand that whether you’re buying your first home, looking to sell an investment property, or expanding your real estate portfolio, the decisions you make today will have long-lasting implications. That’s why our team is committed to providing you with actionable insights and personalized advice tailored to your unique situation.

Ready to make sense of what 2024 has in store for you in the real estate market? We invite you to book a free appointment with us to dive deeper into your specific needs and how we can help you achieve your real estate goals. Our experts are ready to provide you with the solutions you need to navigate this year’s market confidently. Book your free appointment below!

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