Tuesday, January 30, 2024 / by Barb Fessenbecker
The green and red bars show the predictions from each real estate expert. Now, check out the blue bar on the far left. That gives us a combined average of the experts' predictions showing us the average percentage of home prices will increase by a little over 2% by the end of 2024. This contradicts what most people thought would happen - that the real estate market would crash.
Though home prices will continue to rise, it will be at a more moderate pace than they did in 2023. Inventory will still remain low compared to the number of buyers. This, along with the lowering interest rates, leads to more buyers entering the market. When this happens, there is more competition which drives home prices up.
“With mortgage rates dropping, demand for homes in early 2024 is likely to be strong and will again put pressure on prices, similar to trends observed in early 2023 . . . Most markets will continue to reach new home price highs over the course of 2024.” Says Selma Hepp, Chief Economist at CoreLogic.
This is good news for you! As a future homeowner, you aim for your home's value to increase, as this appreciation builds equity and makes homeownership a wise long-term investment.
Home prices will continue to rise in 2024, but at a slower rate than 2023. Though home prices may be higher than you may have initially budgeted for, it’s smart to buy now, if you’re able, as it could cost you more if you decide to wait longer.
Many current home-owners/future sellers - were lucky enough to secure the historically low mortgage rate of less than 3% in late 2020 to early 2021 by either purchasing at that time or simply refinancing their current homes. When the interest rates skyrocketed to over 8% in more recent years, those would-be sellers were holding off selling their homes in order to hang on to that record low rate rather than financing a new home for more than double the rate. But there’s good news… mortgage rates are still dropping and are expected to continue to drop, as shown in the graph below.
Though we may not see the interest rates drop as low as in in previous years, they are projected to continue to drop a bit more. Let’s see what Dean Baker, Senior Economist at the Center for Economic Research, has to say:
“It also appears that mortgage rates are now falling again. They will almost certainly not fall to pandemic lows, although we may soon see rates under 6.0 percent, which would be low by pre-Great Recession standards.”
So Why Sell Now? Here are 2 Reasons:
You’re No Longer Feeling Locked-In to Your Current Mortgage Rate
In just the past few months, interest rates have dropped significantly and are projected to reach the 5% range. This is a notable decline from the more than 8% we just saw less than a year ago. This is great news for sellers! They no longer have to feel locked-in to their low mortgage rates. There’s a much smaller gap between the low mortgage rate they have now and the current rate making it more attractive and most importantly, more affordable to sell now. Lance Lambert, Founder of ResiClub, explains:
“We might be at peak “lock-in effect.” Some move-up or lifestyle sellers might be coming to terms with the fact 3% and 4% mortgage rates aren’t returning anytime soon.”
Increase of Buyers Entering the Market
The number one reason buyers have been holding off purchasing a home were the high mortgage rates, according to data from Bright MLS - see the graph below:
These lower mortgage rates make it more affordable for prospective buyers luring them to enter the real estate market. More buyers mean more competition for your home which boosts up the sale price helping to close the gap between the seller’s currently low mortgage rate to the new slightly higher interest rate.
Mortgage rates are coming down and more buyers are entering the market, so if you’ve been waiting to sell, the wait is over! Connect with our experts at Emmer Real Estate!