Do Homebuyers Really Have The Upper Hand in 2024?

Over the past few years, prospective homebuyers have faced a slew of challenges in the housing market, from skyrocketing prices to historically low inventory levels and rising mortgage rates. These hurdles have made the dream of homeownership increasingly elusive for many. However, as we look ahead to 2024, there’s a sense of cautious optimism in the air. Early indicators suggest that the coming year may offer a more favorable landscape for buyers, with potential improvements in affordability and availability.

To recap the recent turmoil: From mid-2020 to mid-2022, home prices soared, only for mortgage rates to subsequently spike, peaking at nearly 8% for the 30-year fixed-rate mortgage in October 2023. This surge in rates significantly impacted affordability, reducing buyers’ purchasing power amidst a scant selection of available properties. Additionally, renters faced their own set of challenges, with annual rent increases outpacing the modest rises seen over the prior 14 years, complicating efforts to save for a down payment.

2024 promises some relief. Expectations point to a softening in mortgage rates, stabilization of home prices, and an increase in the inventory of both new and existing homes on the market. While purchasing a home in 2024 will still present challenges, the process is anticipated to be somewhat less daunting than in the preceding years.

A key factor driving this optimism is the anticipated decline in mortgage rates. Since their peak in the autumn, rates have begun to retreat, with the average rate on the 30-year fixed-rate mortgage dropping to 6.64% by January, according to Freddie Mac. This decrease enhances affordability, potentially reducing monthly payments on a $300,000 loan by $198. With inflation expected to ease, experts from Fannie Mae and the Mortgage Bankers Association forecast the 30-year mortgage rate to average around 6% by the end of 2024, offering a beacon of hope for those looking to enter the housing market.

While home prices are not expected to drop in 2024, the rapid ascent observed from August 2020 to June 2022, which saw a staggering 33.3% increase, is likely to moderate. By December 2023, the median resale price of existing homes had risen to $382,600, marking a 4.4% increase from the year before, as reported by the National Association of Realtors. This slowdown in price growth, while a relief, still leaves buyers grappling with the aftermath of two years of sharp increases. Construction aims at affordability

The construction sector is actively contributing to housing stock, completing over a million single-family homes and 450,000 multi-unit dwellings in 2023. With 1.65 million housing units under construction as we move into 2024, the focus on building more houses than apartments is evident. This increase in construction activity is gradually improving the selection available to buyers, with the inventory of new and existing homes for sale slightly rising from 1.42 million at the end of 2022 to 1.45 million by the end of 2023. Notably, builders are now targeting lower price points, making single-family homes more accessible, as evidenced by the increase in newly built houses priced under $400,000 from 38% in December 2022 to 47% in December 2023.

Despite favorable trends like falling mortgage rates, a slowdown in price increases, and robust construction, the housing market’s affordability in 2024 may still be hindered by homeowners reluctant to sell. Many homeowners enjoy mortgages with rates as low as 3.5% or lower, making them hesitant to enter a market where rates exceed 6%. This “rate lock-in” effect limits the number of homes available for resale, maintaining a tight inventory despite strong demand. However, there’s optimism as more sellers begin to enter the market, driven by various personal needs and desires for change, potentially increasing inventory and stabilizing price growth.

If the outlook for 2024 holds, buyers should brace for competition. Securing preapproval for a mortgage, being willing to compromise on the perfect home, and persevering through potential bidding wars are key strategies for navigating next year’s market. The evolving landscape offers both challenges and opportunities, with a cautiously optimistic view that more buyers will find their footing in the quest for homeownership. To keep things simple, here is what you should look at for in the housing market in 2024.

The commercial real estate sector is navigating through turbulent waters, exacerbated by a confluence of economic pressures and changing market dynamics. A significant concern is the maturity of numerous loans across commercial properties, heralding a potential crisis for landlords and investors alike. This looming predicament is attributed to a variety of factors, including the shift towards remote work, which has led to increased office vacancies, and the tightening of lending criteria by financial institutions. These elements collectively contribute to a precarious environment for commercial property markets, with many stakeholders bracing for potential defaults and financial strain.

The commercial mortgage market is particularly vulnerable to the current climate of rising interest rates. Higher borrowing costs are placing additional pressure on property owners, who are already grappling with the challenges of filling vacant spaces and securing refinancing for maturing debts. This situation is further complicated by a reduced appetite for bank lending in the commercial sector, leading to a contraction in available financing options. As interest rates continue to climb, the burden of existing and new debt becomes increasingly unsustainable for many in the industry, raising the specter of widespread defaults and a potential crash in commercial real estate values.

Despite the daunting outlook, there are glimmers of resilience within the commercial real estate sector. Some market segments, such as industrial and retail spaces, have shown adaptability by repurposing vacant offices and embracing e-commerce trends. Additionally, efforts to renegotiate lease terms and explore alternative financing solutions are underway, offering a lifeline to some property owners. However, the overarching sentiment remains cautious, with experts emphasizing the need for strategic planning and robust risk management to navigate the uncertain terrain ahead. As the commercial mortgage market confronts these challenges, the coming years will be pivotal in determining the sector’s trajectory and its ability to weather the storm.