As spring starts, it also brings the home-buying season closer. However, this spring may not see the usual flourish it experiences due to the high mortgage interest rate predictions and the low housing stock, seen for the first time in history.
First-time buyers who hope to buy a home soon may need to accept the high home prices and mortgage rates in 2024.
It has been reported that the median sale price for existing homes in the US has reached $382,600, making the month of December 2023 the sixth consecutive month of year-over-year price increases. By the end of January 2024, the average 30-year mortgage rate stood at 6.84 percent, a decrease from its recent high but still higher than many homeowners’ locked-in rates.
Housing Market Predictions For 2024
Mortgage rates nearly doubled in 2022 due to the Federal Reserve’s focus on controlling inflation, and since then, rates have remained high. Though the Fed does not set mortgage rates directly, lenders follow their lead, and as the Fed increased rates, so did the mortgage rates, and it is possible it will be the same with mortgage rates in 2024.
The Federal Reserve has not introduced any rate cuts yet but suggested that rate cuts might be on the way. However, experts indicate in the housing market forecasts that homebuyers will still face challenges throughout the year.
Greg McBride, Chief Financial Analyst For Bankrate, has said that the mortgage rates in 2024 are expected to decrease as inflation comes down and the Fed cuts short-term rates. However, he added that according to his mortgage interest rate predictions, the rate might only go below 6 percent later in the year.
He said that rates could drop even further if there is more economic slowdown, but that might come with other challenges.
Sam Khaled, Chief Economist at Freddie Mac, said that the recent rise in rates has slowed down homebuyer activity as the country enters the spring, which is typically a busy time for home buying.
Even though home prices in the US went down in December for the second month, the latest S&P CoreLogic Case-Shiller Home Price Index showed they were still 5% higher than the previous year.
Experts expect home prices to increase more slowly in 2024 than in the last few years, with variations in different regions depending on local market supply.
Mark Fleming, chief economist at First American Financial Corporation, predicted in his housing market prediction for 2024 that there might be a “flat stretch” ahead. He added that if the housing market in 2020-2021 was too hot, it would be too cold in 2023, and 2024 would be right later.
Housing Inventory Forecast 2024
Throughout 2023, the housing supply remained very low. By December, about 1 million existing homes were for sale, higher than the previous year but down 11.5% from November. This means there was only a 3.2-month supply, lower than the 5 to 6 months typically needed for a balanced market.
Lawrence Yun, Chief Economist at the National Association of Realtors, said there are just not enough homes available for sale, and the market could easily absorb double the housing inventory in the current sales market.
For inventory levels to improve, an increase in homeowners listing their existing properties or a considerable number of new-construction homes would need to be released into the market. While both seem unlikely, Yun’s housing market forecast predicts some increase in housing inventory for 2024.
He added, “There will be more home construction, and more existing homeowners will be willing to sell and give up their low mortgage rates.”
With many homeowners ‘locked in’ at low-interest rates or unwilling to sell due to high home prices, demand continues to be higher than the housing supply and will likely stay like that for a while.
Rick Sharga, Founder and CEO of CJ Patrick Company, said that he expects to see a reasonable increase in the supply of existing homes for sale once mortgage rates reach the 5% range, which he thinks is impossible in 2024.
The housing stock has remained at a historic low, especially when considering entry-level supply, which has sustained demand and kept home prices very high for an extended period.
However, things are looking up with some positive signs for the housing market forecasts.
Home builders’ outlook has improved because of the lower mortgage rates and improved building conditions.
The latest NAHB/Wells Fargo Housing Market Index (HMI), which measures builder sentiment, has increased from 48 in February to 51 in March. When the HMI index is above 50, it shows that more builders are optimistic about future construction conditions.
Moreover, according to the Commerce Department, new single-family building permits increased in February, reaching the highest level since April 2022.
Housing Market Predictions: Who Has the Advantage?
Even though a lot of data is floating around, the main question that has risen a lot is who has the advantage in the Housing Market Predictions: Buyers or Sellers?
The median existing-home price reached $382,600 in December, an increase of 4.4% from the previous year. Although unsold homes increased by 4.2% from December 2022, with a 3.2-month supply, the market is competitive for sellers in many areas.
Similarly, existing home sales decreased by 6.2% year-over-year, at their lowest in 30 years, showing less buyer demand, which could give the buyers more negotiating power. Moreover, homes remained on the market for 29 days in December, compared to 25 days in November.
The data has favorably favored both parties, and it is still too early in 2024 to correctly predict who will have the advantage in this Housing Market Forecast. However, here are some tips for both buyers and sellers to consider.
Tips for Buyers
Hannah Jones from Realtor.com talks about the housing market forecast and advises buyers who are looking forward to mortgage rates in 2024 to focus on their budget and suggests they form an affordable monthly payment, considering factors like the home price, down payment, mortgage rate, loan term, home insurance, and property taxes.
She added that it was important to be flexible about the size and location of the home, recommending either a smaller home in a good neighborhood or a larger, newer home in a more distant area.
Tips For Sellers
According to Gary Ashton from the Ashton Real Estate Group of RE/MAX Advantage, it is crucial to know the latest pricing details of similar homes sold in their market, understand the competition, and set a competitive price for your home.
He added that keeping the homes in excellent condition is essential, as it helps create a solid first impression for buyers, especially those browsing the homes online.
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