Housing Market Forecast 2024: When will cost become affordable?

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Those hoping to own their own home get an early New Year's gift: lower mortgage rates.

The average rate on 30-year fixed mortgages has fallen by half a percent since the beginning of October. According to the Federal Home Loan Mortgage Corporation (Freddie Mac), the average rate fell 7 basis points to 7.22% for the week ending Nov. 30. Despite this, however, high mortgage rates and home prices, coupled with low supply in the housing market, continue to make buying a home out of reach for many, especially first-time buyers''entering this market.

The housing forecast for 2024.

The year 2023 proved to be a depressing one for many hoping to buy a home. Mortgage rates increased significantly, reaching 7.79%, and the average home price was over $400,000 in the third quarter. In July, average monthly loan payments hit an all-time high of $2,306, according to data from financial technology and information service Intercontinental Exchange. However, the year 2024 may prove more favorable for home buying. While home prices are likely to remain high and even increase in some parts of the country, industry experts expect prices to decline in certain areas. Economists are also optimistic that the Federal Reserve''s ended its 20-month campaign to raise rates after the decision to keep the federal funds reserve rate unchanged for the second consecutive week on Nov. 1 and inflation showed a slowdown in October. The federal funds reserve rate is the benchmark interest rate at which financial institutions lend to each other overnight and tends to indirectly affect mortgage rates. However, housing affordability challenges will continue into 2024. Accumulated demand and low supply will collectively support prices, and high mortgage rates will remain until the Federal Reserve acts to lower federal funds reserve interest rates.

When the residential market'. 'will recover?

For there to be a recovery in the housing market, several conditions must be met, says Gumbinger. First, we must see a significant increase in supply in the housing market. This additional supply will, in turn, alleviate upward pressure on home prices, stabilizing them or even helping them decline. And, of course, interest rates should cool. But Gumbinger warns that interest rates shouldn't fall too quickly. A sharp drop in interest rates could cause a surge in demand, wiping out the benefits of increased supply and driving up home prices. "It would be better if the rate cuts were gradual, gradually improving buyers' options over the''a certain amount of time, not all at once," says Gumbinger. He also believes that returning mortgage interest rates to a more "normal" range from the upper bound of 4% to the lower bound of 5% will also help the housing market return to 2014-2019 levels. However, Gumbinger predicts that it will still be some time before those rates are reached.

Will mortgage accruals remain low through 2024?

According to the Mortgage Bankers Association (MBA), mortgage applications have declined markedly over the past few years as mortgage rates have risen. However, as interest rates have fallen, purchase and refinance application activity has increased slightly. Nevertheless, application activity''remains very low due to high mortgage rates and affordability issues, says the Mortgage Bankers Association (MBA). Still, there is a bright side. Mortgage applications for new homes rose nearly 40% in October, the ninth consecutive month of growth. Moreover, new construction has provided an opportunity for first-time buyers to enter the market. While the Mortgage Bankers Association expects a slight recession in the first half of 2024, it projects mortgage accruals to increase from an expected $1.64 trillion in 2023 to $1.95 trillion next year, with rates falling to around 6% by the end of 2024.

Housing availability forecast for 2024.

Since many homeowners have already mothballed''their low interest rates or don't want to sell because of high home prices, demand continues to outstrip the supply of homes and likely will for some time to come. "I don't expect to see a significant increase in the supply of existing homes for sale in the market until mortgage rates drop to 5% APR," says Rick Sharga, founder and CEO of market analytics and business consulting firm CJ Patrick Company.

Home prices rose, while secondary market sales fell.

Although it's not yet winter, secondary market sales have frozen due to affordability issues''and a shortage of housing supply. After rising 2.7% in September, sales fell 4.1% in October and annual transactions fell nearly 15%, now at their lowest level since 2010, according to the latest monthly data released by the National Association of Realtors (NAR). It's not surprising that sales are low considering the median price of existing homes rose to $391,800, a 3.4% increase from a year ago and a new record for October. The increase in home prices also marks the fourth consecutive month of year-over-year increases. "Home prices continue to be a major challenge, and many prospective buyers likely find themselves torn between waiting for better terms and rates'''and the decision to rush to take advantage of them,' says Daniel Hale, chief economist at Realtor.com in an email.

Homebuyers see no prospect of improving affordability.

If you're looking to buy a home today, expect prices to be 40 percent higher through February 2020, according to Zillow. In the third quarter of 2023 alone, home prices rose in more than 80% of U.S. metropolitan areas compared to the previous year. Combining high home prices with mortgage interest rates that have remained above 7% since August amid sustained inflationary pressures, it's no surprise that Fannie Mae's latest Home Buyer Sentiment Index (HPSI) showed a record 85% of surveyed prospective buyers who believe their''Plans to buy a home put on hold.

Should I wait until 2024 to buy a home?

Buying a home is a purely personal decision, regardless of the state of the market. Since a home is the biggest purchase in most people's lives, it's crucial to be in a sound financial position before getting into it. Use a mortgage calculator to estimate your monthly housing costs based on your down payment. But if you're trying to predict what might happen next year, experts say that's probably not the best strategy for buying a home. "The housing market, like many other markets, is almost impossible to predict," said Orfe Divungi, a senior macroeconomist at Zillow Home Loans. "The best time to''potential buyers are when they find a home they like, that meets their current and future needs and that they can afford." Gumbinger agrees that it's hard to tell future homeowners to expect better terms. "More often than not, home prices continue to rise, so the down payment savings goal is constantly shifting, and it's not guaranteed that conditions tomorrow will be much better than they are today." Divungi says "getting into the housing market" is worth starting to build equity and net worth.

Expert tips for buying into today's housing market.

Frick offers the following advice to asst. buyers: move into cheap housing markets if you can change jobs or work remotely;''Prepare ahead to act quickly - research your financial situation, gather the necessary documents, look at offers from several lenders and improve your credit rating; check prices and offers regularly to get ahead of the competition; know how much your monthly payment will be - including taxes - and how it fits into your budget.

Expert tips for selling in today's housing market.

Divungi offers the following advice to sellers: work with a realtor to get the price right, encourage buyer competition and sell faster; prepare your home for sale as early as possible; showcase your property online - create a virtual tour of the home or an interactive plan''floors to attract more page views and saves.

Will rising interest rates drive down house prices?

While rising mortgage rates may knock some potential buyers out of the market, it doesn't always translate into lower home prices. For example, despite mortgage rates soaring in 2023, the national median home sale price has remained stable due to strong demand for home purchases with limited supply. Consequently, home price trends may depend on whether there is enough supply to meet demand.

What happens if the housing market collapses?

Most experts don't expect the real estate market to collapse in 2024,''as many homeowners have substantial home equity. The problem lies mainly in the affordability of housing. High interest rates and inflated home prices make homeownership difficult for young buyers. Rising interest rates and home prices have made it impossible for young buyers to purchase homes affordably, says NAR.

What happens if I buyreal estate before the recession?

If you have the financial ability to buy a home that you intend to live in for a long time, then it doesn't matter when you buy it, as you will be living in it in both economic upswings and downswings. However, if you are planning to buyreal estate for the purpose of short term investment,''buying during the peak price period before a recession will involve greater risks.