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There’s a saying that the only consistent thing in life is change. This saying is true in any line of work, but if you’re involved in real estate, this is especially true. No one could have seen the ripple effects that a global pandemic would have in 2020 or the frenzy in real estate that was a direct effect of it. In the wake of COVID, people all over the country took a look at where they lived, and many chose to make a change.
As a result of inflation, mortgage rates rose to their highest levels in 20+ years, nearly 8%. Because of these increased rates, home sales dropped from their dizzying levels just months prior. The housing market has been somewhat stagnant, but the recent drop in mortgage rates has caused some housing experts to say that 2024 might be a return to a more predictable homebuying cycle.
Dr. Jessica Lautz, Deputy Chief Economist & Vice President of NAR Research, recently wrote that first-time homebuyers, who have been on the sideline in recent months, might be poised to enter the market: “Mortgage interest rates continued to incrementally decline, dropping to 6.67% from 6.95% last week. For a $400,000 home, this is a monthly mortgage payment of $2,059-a monthly savings of $242 from when rates were at 7.79% in October. Mortgage interest rates for the 30-year fixed are also nearly a full percentage below the historical average since 1971 of 7.74%.
Dr. Lautz continues. “First-time buyers traditionally fare better in the winter, as there is less competition from families in the homebuying market. November’s REALTORS Confidence Index shows first-time buyers up at 31% from 28% the past month. This represents a buying period when mortgage rates were still high. Home buyers who have been priced out in the last year should find optimism in 2024.”
As Dr. Lautz pointed out, these dropping rates mean real money in homebuyer’s pockets. But if these rates keep falling, first-time homebuyers might find themselves in a similar spot to what homebuyers faced in 2020 and 2021: a fast market where multiple offers and cash offers are the norm. The solution to these issues is increased housing inventory, and there might not be enough properties to satisfy the demand. The National Association of REALTORS® Research Group, releasing a study of the markets with the most pent-up housing demand commented, “The current housing shortfall has been accumulating over decades. After the mid-2000s housing boom, the U.S. has consistently underbuilt compared to the historical average. Furthermore, with mortgage rates hovering around 7 percent for most of the year, fewer homeowners opted to list their homes in 2023. This rate is nearly 1.7 percentage points higher than the average rate in 2022. Consequently, this long-standing underbuilding issue and the rate lock-in effect continued to keep housing inventory low throughout the year.”
So, what does this mean to those looking to buy or sell a home in 2024? No one has a crystal ball, but signs are pointing toward a possible return to normal for mortgage rates, meaning more people are looking to buy. This increased activity might benefit those looking to sell since housing inventory remains lower than the historical average. In short, these factors need to be considered when looking to purchase and consulting a REALTOR® to help guide you through the process. A REALTOR will be your trusted guide throughout what could be a fast and frantic process. REALTORS work for their clients and communities every day. That’s Who We R®.