Mortgage rates’ direction? Housing market forecast for 2024.
Many Americans are currently facing a housing affordability crisis, but there is hope on the horizon. Industry experts predict that mortgage rates will start to decline in the second quarter of next year, bringing relief to homeowners.
Lawrence Yun, the chief economist for the National Association of Realtors, anticipates that 30-year mortgage interest rates will hover around 6 percent by next spring.
Speaking at an event held by the Hudson Gateway Association of Realtors in White Plains, New York, Mr. Yun expressed his optimism for the real estate industry in the second quarter of 2024.
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“This has been a challenging year, but I believe that interest rates and home sales will improve early next year. While total sales may still be slightly lower than 2019, we will see an improvement compared to 2023,” Mr. Yun stated.
Mr. Yun attributed the current market lull to rising interest rates, limited inventory, and inflation. He acknowledged that the current environment is not ideal for first-time home buyers.
“Inflation has been on the rise, making the purchasing power of the dollar weaker. The good news is that inflation is now trending downward, and we urge the Federal Reserve to halt interest rate hikes as inflation returns to normal,” he explained.
Rents have also seen a significant increase, rising by 7.8 percent, and car insurance rates have skyrocketed by 19.1 percent, according to Mr. Yun.
With mortgage rates currently at a 20-year high of around 7 percent, the downgrade of America’s debt rating from AAA to AA by Fitch Ratings has further contributed to higher interest rates.
Valerie Saunders, president of the National Association of Mortgage Brokers (NAMB), echoed Mr. Yun’s assessment and called for the Federal Reserve to consider reducing interest rates.
“Lowered interest rates have the potential to make home buying more affordable for a wider range of people,” Ms. Saunders said.
While existing home sales have declined by 21 percent compared to last year, newly constructed home sales have returned to pre-COVID levels. However, the higher costs of new construction can still pose financial challenges for first-time buyers, Mr. Yun noted.
Residential prices in the lower and mid-range continue to climb, with multiple offers, while higher-end homes are showing some price concessions.
Karen Hatcher, CEO of Sovereign Realty & Management in Atlanta, Georgia, advised first-time buyers to consider purchasing a starter home that may require some renovations.
“They can always update the bathroom or kitchen, paint, or change light fixtures. They’ll be building equity, and in a few years, they can upgrade. The ‘perfect home’ is not instant—it’s a journey,” Ms. Hatcher explained.
Ms. Hatcher also emphasized that younger individuals who have never owned property need to be prepared for tasks like landscaping and home improvement projects if they want to build equity.
Teresa Kinney, CEO of the Miami Association of Realtors, highlighted the low inventory in the market and predicted that the beginning of 2024 may not see significant changes.
“Population growth and demand from domestic and international buyers are driving the high demand. Historically, a market with less than six months of supply experiences appreciating prices,” Ms. Kinney said.
Miami has witnessed nearly 12 years of consecutive home price growth, making it the longest streak on record.
Mr. Yun also discussed proposed legislation that could help increase inventory by raising the amount of allowance before capital gains tax. Currently, any home sale profits over $250,000 are subject to capital gains tax.
“This amount hasn’t been changed in 25 years, and many home sales today generate profits well beyond that threshold. It’s time to adjust this allowance to reflect the changes in the market,” Mr. Yun urged.
Despite the challenges, Mr. Yun shared research indicating a significant number of Americans are ready to buy once the market stabilizes. This includes new marriages, new babies, individuals turning 65, and those with new jobs.
What measures should policymakers take to address the housing affordability crisis and make homeownership more accessible and affordable
He United States have been steadily rising, making it increasingly difficult for Americans to afford a home. Factors such as rising interest rates, limited inventory, and inflation have contributed to the housing affordability crisis. However, experts in the industry are hopeful that mortgage rates will start to decline in the second quarter of next year, providing much-needed relief to homeowners.
Lawrence Yun, the chief economist for the National Association of Realtors, predicts that 30-year mortgage interest rates will hover around 6 percent by next spring. Speaking at an event in White Plains, New York, Mr. Yun expressed his optimism for the real estate industry in the second quarter of 2024. He believes that interest rates and home sales will improve early next year, although total sales may still be slightly lower than 2019.
The current market lull can be attributed to the combination of rising interest rates, limited inventory, and inflation. Mr. Yun acknowledged that this environment is not favorable for first-time home buyers. He explained that inflation has weakened the purchasing power of the dollar, making it more challenging for individuals to afford a home. However, he emphasized that inflation is now trending downward, and he urged the Federal Reserve to halt interest rate hikes as inflation returns to normal.
In addition to rising housing costs, other expenses such as rents and car insurance rates have also seen significant increases. Rents have risen by 7.8 percent, while car insurance rates have skyrocketed by 19.1 percent, according to Mr. Yun. These rising costs, combined with high mortgage rates, have further hindered Americans’ ability to afford a home.
Valerie Saunders, president of the National Association of Mortgage Brokers (NAMB), agrees with Mr. Yun’s assessment and calls for the Federal Reserve to consider reducing interest rates. Lowered interest rates have the potential to make home buying more affordable for a wider range of people, she states.
While existing home sales have declined compared to last year, newly constructed home sales have returned to pre-COVID levels. However, the higher costs associated with new construction can still pose financial challenges for first-time buyers, Mr. Yun noted.
In conclusion, the housing affordability crisis in America has posed significant challenges for many individuals and families. However, industry experts are optimistic about the future, as they predict that mortgage rates will start to decline in the second quarter of next year. This anticipated relief in mortgage rates will provide some much-needed respite to homeowners. Nevertheless, it is crucial for policymakers to address the underlying factors contributing to the housing affordability crisis, such as rising interest rates, limited inventory, and inflation. By taking proactive measures to address these issues, the goal of making homeownership more accessible and affordable can be achieved.
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