Home Prices and Mortgage Rates
Prospective home buyers are eagerly awaiting signs of relief in the housing market in 2024. Conditions might ease after a challenging 2023, with soaring mortgage rates and record-high home prices. According to Freddie Mac, mortgage rates, which climbed to 7.79% in 2023, have recently seen a modest decline, reaching 6.66% for the week ending January 11.
However, despite this slight reprieve, the persistent scarcity of housing inventory keeps home ownership out of reach for many, especially first-time buyers. Industry experts predict that while certain areas might experience a softening of prices, the overall trend is likely to remain elevated, posing ongoing challenges for affordability.
Housing Market Forecast
Economists express optimism that the Federal Reserve’s decision to pause its rate-hiking campaign in December 2023 could provide stability. However, affordability challenges will persist throughout 2024 due to pent-up demand and low housing inventory. Mark Fleming, chief economist at First American Financial Corporation, anticipates a “flat stretch” for the housing market in 2024.
Conditions for Housing Recovery
To witness a genuine housing recovery, experts emphasize the need for a substantial increase in the inventory of homes for sale. Keith Gumbinger, vice president of mortgage website HSH.com, highlights the importance of a gradual decline in interest rates to avoid a surge in demand that could offset inventory gains.
Mortgage Originations and Inventory Outlook
Despite recent declines in mortgage rates, the Mortgage Bankers Association (MBA) anticipates a slow recovery in mortgage originations, projecting an increase from $1.64 trillion in 2023 to $1.95 trillion in 2024. Housing inventory remains a significant concern, with low supply expected to persist, particularly in the entry-level segment.
Existing-Home Sales Rebound
November 2023 witnessed a surprising uptick in existing home sales, breaking a five-month decline streak. While this may signal a potential turnaround in 2024, challenges like high mortgage rates, rising home prices, and low inventory persist. Installing rates could stimulate buyers and sellers, potentially increasing sales activity.
Affordability Concerns in 2024
Despite hopes for improved affordability, the reality for homebuyers remains challenging. Home prices are reported to be 40% higher than in February 2020, and the Fannie Mae Home Purchase Sentiment Index indicates a record 86% of consumers putting home-buying plans on hold. Affordability conditions, particularly for first-time buyers, will continue deteriorating in 2024.
Housing Market Stability and Potential Crash
While certain areas may experience price declines, the likelihood of a housing market crash remains low. Experts note that today’s homeowners are more secure than those during the 2008 financial crisis. Factors such as Millennials entering prime home-buying years, wage growth and financial stability are expected to sustain housing demand, preventing a significant market downturn.
While foreclosure activity has slightly increased, experts do not anticipate a wave of foreclosures in 2024. The strength of the economy, low unemployment, steady wage growth, and homeowner equity are cited as factors contributing to the housing market’s resilience against a foreclosure surge. Foreclosure filings may increase, but auctions and lender repossessions are projected to remain below 2019.
Timing the Housing Market
As uncertainties loom over the 2024 housing market, experts emphasize the difficulty of timing real estate decisions. The market’s complexity, high mortgage rates, and tight inventory make it challenging for buyers to wait for better conditions. Prospective buyers are advised to focus on finding a suitable home based on current needs and financial capability.
The housing market in 2024 presents challenges for buyers and sellers, with high mortgage rates, soaring home prices, and persistent inventory shortages. While recent rate declines may provide some relief, the intricacies of the market suggest a cautious approach. Seeking guidance from experienced local real estate agents is recommended for those navigating the complexities of the 2024 housing landscape.