Millions of Americans are still renters because housing affordability kept them out of the market in 2023. What are their prospects for 2024?
There was at least one encouraging trend at the end of last year. Mortgage rates, which topped out near 8% in October, had slid below well below 7% at the end of December. At the same time, however, home prices remained near their record high.
Dr. Selma Hepp, chief economist at CoreLogic, which tracks home prices, says whether conditions improve for buyers may depend on whether inflation continues to fall.
“With the Fed validating some of the market expectations and suggesting more cuts than expected going into the last Federal Open Market Committee meeting of 2023, financial markets have eased up on long-term rates,” she told ConsumerAffairs. “That suggests that the 30-year fixed mortgage rate could end up below 6% by the end of 2024, absent any new surprises on the inflation front.”
The anticipation of lower rates
Daniel Smith is the founder of Keepingly, a property technology platform for homeowners to manage, maintain, pay, and keep records of all their home services and expenses. He is even more optimistic that mortgage rates will continue to fall.
“With the Federal Reserve's anticipated rate cuts, a downward trend in mortgage rates is likely, Smith told us. “It may not be as dramatic as some expect. However, rates could fall within the range of 5%.”
Dustin Heiner comes at real estate from the investment side. His company, MasterPassiveIncome.com, guides people in the real estate investment process. He says there are several reasons 2024 will be a better year in which to buy a home.
“Prices have been coming down since the high in 2023 which will help home affordability for most people,” Heiner said. “The Fed Rate does not make mortgage rates, but they do influence it. Rates for homes seem to be coming down from the highs in 2023 from 7% to 5% which will help buyers have a lower mortgage payment overall.”
Centennial Bank Florida Regional President David Druey also expects the outlook for buyers to be more promising in 2024.
“In 2023, concerns about a potential recession and the devaluation of properties created uncertainty in the market,” said. “However, we’re now expecting a soft landing concerning the downturn, especially with indications that the market is stabilizing, preventing drastic price drops.”
Would lower rates mean higher prices?
But if mortgage rates fall to 5%, that could bring a lot of pent-up demand back into the housing market. What will that mean for home prices?
“The decrease in interest rates will absolutely impact the affordability that had knocked many purchasers to the sidelines or caused to buy a smaller property,” Nicole Beauchamp, associate broker at Sotheby's International Realty,” told ConsumerAffairs. “However as rates decrease and more buyers come to the market -- unless inventory is similarly increasing there could be competitive bidding scenarios.”
Heiner says a decline in mortgage rates would likely increase demand, without necessarily increasing the supply of existing homes. That could offset advantages for buyers.
“As the mortgage rate lowers, prices usually rise because more buyers enter the market and purchase the homes.”
But while the inventory of existing homes remains at historic lows, Hepp points out that the supply of new homes has been steadily increasing. New homes tend to be more expensive than existing homes but falling interest rates could make them more affordable for some buyers.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-01-03 12:23:00
