05/23/2024
THE HOUSING MARKET
Here's an update.
Being a Real Estate Notary, I have seen why the market is so low now. During that time I was doing 2-3 home loans a day; bringing peoples rates to all time lows.
Some reasons were that during COVID the rates here in California were around 3%. So many people bought property and re-financed property to low payments. That said. These people are holding on and waiting for the now, high rates to fall. Even delaying selling or moving to an upgrade. They call this a "Locked In" market.
HERE'S WHAT TO EXPECT IN THE NEAR FUTURE.
2024 Housing Market Trends: A Guide to What's Expected
High home prices, a record-low shortage of inventory and relatively high mortgage rates almost brought the housing market to a standstill in 2023. In fact, existing home sales plunged to their lowest level in 28 years, according to the National Association of Realtors, or NAR.
But there's opportunity for change on the horizon, with several key indicators showing that home sale activity is picking up while mortgage rates are expected to trend down. These combined factors could change the game for many would-be homebuyers and sellers who've been waiting on the sidelines.
1The impact of the lock-in effect
To understand where the housing market may be headed, it's important to first review what forces led to this point.
Many homeowners secured historically low mortgage rates during the pandemic. Data from the Federal Housing Finance Agency shows that in the third quarter of 2023, roughly 60% of homeowners had a mortgage rate below 4%, and 22.6% reported an interest rate less than 3%. Many of these homeowners are now reluctant to sell and let go of their low interest rates, creating what economists call a lock-in effect.
To keep a lid on inflation, the Federal Reserve raised its benchmark rate three times in 2023, making it more costly for Americans to borrow money. Fixed mortgage rates—which are tied to the 10-year Treasury yield—also increased, which created another obstacle for homebuyers. As a result, the average 30-year interest rate was 6.61% at the end of 2023—more than double what it was 2 years prior, Freddie Mac data shows.
The combination of low housing inventory and rising mortgage rates means aspiring homebuyers faced an uphill battle last year. However, things may be looking up for both buyers and sellers. Mortgage rates are expected to fall in the coming months—perhaps just not as quickly as many economists predicted.
2Where the housing market is headed
According to a March 2024 forecast by the Mortgage Bankers Association, the average 30-year mortgage rate is expected to drop to 6.3% in the third quarter of 2024 and 6.1% in the fourth quarter. If mortgage rates do come down, home sales will pick up, says John Millen, a Premier Relationship Banker at First Citizens.
In fact, it's already happening. Sales of existing homes jumped 9.5% in February—the highest monthly uptick in a year, according to the NAR. Total housing inventory also reached 1.07 million units in February, up 5.9% from January.
An uptick in new construction is helping to boost inventory. Sales of new single-family homes hit a seasonally adjusted annual rate of 662,000 in February, a 5.9% increase from a year prior, according to estimates released by the US Census Bureau and the US Department of Housing and Urban Development.
Home value growth is also expected to stabilize this year. CoreLogic's economists, Opens in a new tab are forecasting a 2.6% increase from January 2024 to January 2025—a significant slowdown compared to recent years. At the same time, Realtor.com's 2024 Housing Forecast, Opens in a new tab is predicting a 1.7% decrease.
What does this mean for homeowners?
Despite slowing appreciation, many homeowners have gained a significant amount of equity in their homes over the past few years, says Bill Duff, a mortgage banker at First Citizens. The average mortgage holder now has $193,000 of accessible home equity, according to a February 2024 report from data analytics firm ICE Mortgage Technology (PDF), Opens in a new tab—with equity levels climbing 11% last year alone.
High levels of tappable equity provide homeowners with a few options. They can sell their property and put the profit toward purchasing their next home, or they can use a home equity loan, home equity line of credit or cash-out refinance to fund home improvements, pay off high-interest debt or accomplish a different financial goal.
