Mortgage Rates Housing Market: What You Need to Know
Overview of the housing market
The US housing market has experienced a rollercoaster couple of years since the start of the COVID-19 pandemic in 2020. After an initial dip in early 2020, record low mortgage rates fueled a surge in homebuyer demand that outpaced limited housing supply. This imbalance led to an extended seller’s market with fast-rising home prices. While demand is starting to moderate in 2023-2024, housing inventory remains tight and home prices are still up nationwide year over year.
Key factors influencing housing market trends
i. Inflation and Federal Reserve policy
A key factor impacting the housing market is inflation, which rose sharply in 2021 and 2022 due to pandemic-related supply chain disruptions and high consumer demand. In response, the Federal Reserve has aggressively raised interest rates multiple times this year aiming to cool the economy and bring inflation under control. Higher rates influence mortgage rates, affecting affordability and purchase demand.
ii. Mortgage rates
After dropping to record lows under 3% during the pandemic, average 30-year fixed mortgage rates have jumped over a percentage point in 2022 alone to around 7% as of fall 2023. The swift rise has made home loans significantly less affordable and reduced homebuyer purchasing power. Higher borrowing costs are likely to continue dampening housing demand.
iii. Low inventory
The number of homes for sale remains near all-time lows compared to demand. Limited housing construction over the past couple years due to high costs and shortages coupled with strong demand has led to an undersupply situation. Low availability continues putting upward pressure on home prices.
Housing market forecasts for 2024
i. Home price predictions 2024
Most analysts project nationwide home prices will rise at a slower pace or stagnate through 2024 as higher rates reduce competition among buyers. The S&P CoreLogic Case-Shiller Index is forecast to climb around 3-5% annually over the next couple years according to various forecasts. Some cooling is expected across most major US markets.
ii. Mortgage rate predictions 2024
The Mortgage Bankers Association (MBA) predicts average 30-year fixed mortgage rates will be between 6.5%-7.0% through the first half of 2024 before edging lower in the second half as inflation cools. The Federal Reserve is expected to keep raising rates but at a slower pace next year.
iii. How likely is a housing market crash in 2024?
While the market is slowing from the unsustainable fast growth seen during the pandemic, most experts don’t foresee a crash. Demand is still being supported by strong job and income growth. The rising rate environment may cause some downward price adjustments, but overall inventory remains tight, limiting potential for dramatic declines nationally.
Will it never be a good time to buy a house?
With so much uncertainty around inflation, rates, and home values, it’s understandable prospective buyers may feel there’s never an optimal time to purchase. However, personal needs should also factor in – if renting long-term doesn’t make financial sense for your situation, history suggests real estate values over the long-run tend to appreciate steadily. Timing the market perfectly is impossible. Having patience and flexibility in criteria like location can help first-time buyers find a stable home when prices seem daunting.
Is it a good time to buy a house now?
While higher rates reduce affordability in the 2023-2024 period, buying may still make sense for homeowners with stable financial situations. Inventory is expected to remain limited, leaving room for prices to hold steady or appreciate gradually. Those locking in a mortgage now can take advantage of rates that are likely to level off or drop again after the Fed’s rate hiking cycle ends. Additionally, sitting out the market entirely risks losing out on potentially years of appreciation and equity buildup. Weigh factors like job security, how long you plan to stay, and timing your purchase within seasonal cycles.
When will the ‘silver tsunami’ impact housing prices
Looking further down the road, experts predict the massive wave of aging baby boomers into retirement over the next 10-15 years dubbed the “silver tsunami” is poised to have profound impacts on the housing market. As boomers transition from family homes into assisted living and senior housing, analysts foresee an influx of inventory hitting the market that could help alleviate supply constraints. At the same time, retiring boomers with equity in their homes may opt to downsize and spark a new surge of demand smaller, lower-maintenance properties. The end result is likely to be stabilized home values and availability across a wider range of housing styles catering to older Americans’ changing needs.
How to prepare to buy a house
1. Get your finances ready
Paying down debt, saving for a larger down payment, establishing credit are all essential steps to prepare. Aim for a 20% down payment if possible to avoid private mortgage insurance (PMI). Shore up an emergency fund before making a big purchase commitment.
2. Look for affordable mortgages and other first-time homebuyer assistance
Various programs offer loans with lower rates or down payment requirements. Check if you qualify for any assistance in your state or city to lessen upfront costs.
3. Time your purchase right
Avoid buying during peak spring and summer seasons if possible for better negotiating leverage. Winter months often have better deals.
4. But don’t rush
Take your time to research areas, get pre-approved, make offers, and inspect before finalizing a 30-year obligation. Avoid emotional decisions.
5. Build your savings
Extra cash on hand allows flexibility and contingency funds in case issues crop up after moving in. Overall financial stability is key to long-term homeownership.
Housing market predictions 2024 FAQs
Will there be a housing recession in 2024?
A housing recession, defined as two consecutive quarters of declining home prices nationwide, is not expected in 2024 based on current forecasts. Slowing but positive price growth is the predominant outlook as strong job growth offsets rising rates’ pressure.
Will 2024 be a better year to buy a house?
While rates are predicted to remain above historical averages, levels may moderate by late 2024 from the highs seen in 2022-2023. Inventory is also seen gradually increasing, improving options for buyers. On balance, 2024 should be a less frenzied market with more stability versus the last two pandemic-influenced years.
How accurate are housing market predictions?
Past housing predictions often prove imprecise due to difficulties gauging macroeconomic and external factors’ impacts. The pandemic illustrated uncertainties. At a broad national level, forecasts tend to be most reliable, while localized markets can diverge. Overall, projections serve as guidelines rather than guarantees. Unforeseen events influence outcomes.
What is the expected trend for housing prices in 2024?
CoreLogic, Zillow and other forecasters anticipate appreciating home values in 2024 but at a more modest 3-5% annual pace on average nationwide as demand-supply balances moderate and rates hamper bidding wars. Prices are projected to stabilize after the recent surge but still trend upward over the long-run with job/income expansion and tight inventories supporting values.
Should I buy a house now or wait based on current market predictions?
The best decision depends on an individual’s goals, timeframe and finances. Buying now while rates are projected to flatten out secures a fixed mortgage for years to come. Waiting risks facing higher rates/prices if supply remains low. Overall prices are seen gradually rising, so buyers should feel comfortable purchasing whenever their circumstances align if planning a 5+ year stay. Patience and flexibility are advisable in an uncertain period.
