There are a lot of factors that impact the real estate market and the number of home sales, including mortgage rates, affordability, and inventory levels. An examination of all three of these lead us to two conclusions. First, 2024 will see more home sales than 2023; and second, now more than ever, you need a real estate professional to help you navigate the market.
The first important factor that will help drive increased sales in 2024 is declining mortgage rates. Mortgage rates hit a 23 year high back in late October and early November of last year. Since then, rates have been coming down based on the nearly universal consensus that the Federal Reserve is done raising rates. While rates have currently leveled off, they are expected to continue their decline throughout 2024, with the timing and speed of the rate declines determined by the pace and extent of interest rate cuts by the Federal Reserve.
Forecasters expect that average mortgage rates will be in the low sixes, perhaps high fives, by the end of 2024.
Historically, putting these numbers into perspective, over the last 50 years, the 30-year fixed-rate mortgage has averaged around 7.75%.
While rates will remain somewhat elevated compared to where we were after the pandemic, they are still below historic averages.
The second factor, which is also closely tied to mortgage rates, is affordability.
Lower mortgage rates make homes more affordable. With the economy remaining strong, increased affordability pulls many buyers off the sidelines. Additionally, with the national unemployment rate at 3.7%, the labor market remains strong.
As a result, wages have continued to rise which is particularly good news as lower and more moderate-wage workers have seen the biggest wage increases. Higher wages combined with lower mortgage rates means more people can afford to buy a home.
The third important factor is increased inventory. Higher mortgage rates act as a drag on inventory making some existing homeowners, hesitant to give up their current mortgage rate, stay in their homes longer than they otherwise would. While buying or selling is a financial decision, it is also an emotional, psychological, and family decision. Over time, changing family and financial circumstances is going to result in more people who are willing to list their home for sale, even if it means giving up their current rate.
At the end of the day, buyers in 2024 will find mortgage rates lower than they've been over the past year along with more inventory from which to choose. Sellers will still be able to demand a strong price for their home, but may be forced to negotiate with buyers more than they have in the past. Either way, buyers and sellers will both benefit from being represented by a local knowledgeable real estate expert.
