New year, new housing market!
Could 2024 be the year you become a homeowner? Or are you thinking about selling? Maybe refinancing for a better interest rate?
No matter your position, the 2024 housing market will be one to watch. Experts are already making their predictions and estimations. So, you’ll want to stay ahead of the curve.
Let’s dive into some of the top predictions for the 2024 housing market:
It’s no secret that buying a home has become expensive. Like, expensive expensive.
A quick history lesson:
Median home prices more than tripled between 1992 and 2021. To put it into perspective, that’s a little less than $150,000 jumping to $500,000+ in less than 30 years. Tack on the 3.9% growth over the past year and… Ouch.
The good news? Lower price tags may be in our future! Experts are predicting that the 2024 housing market will see a drop in sky-high prices.
Exact numbers will depend on your market, employment numbers, and overall economic outcomes. But a 5-10% drop in prices isn’t out of the question.
2: Interest Rates Could Fall
A lot of would-be buyers have also been holding off due to high interest rates. And can you really blame them?
Let’s just take a quick look at the power of interest:
Consider a 30-year mortgage for $100,000 with an interest rate of 6% and a 20% downpayment. The total amount paid over the life of the loan is approximately $225,169.20. That’s $625.47 per month for 30 years.
Now, consider a 30-year mortgage for $100,000 with an interest rate of only 3% and a 20% downpayment. The total amount paid over the life of the loan is approximately $173,923.20. That’s $483.12 per month for 30 years.
The same home and the same loan amount, but a difference of more than $50,000! Not to mention, an increase of over 25% when it comes to monthly payments.
It’s pretty easy to see why higher interest rates, which have characterized the recent housing market, might scare some people off.
But, the good news: some experts are cautiously optimistic that rates could come down a bit in 2024. While there probably won’t be any huge decreases, every little bit helps with affordability.
Experts are also projecting potentially higher housing inventory.
Housing inventory: </strong>The number of homes listed for sale plus the number of properties under contract. Basically, the “supply” available within the housing market.
Keep in mind that when supply (housing inventory) goes up, prices tend to go down. That’s because there are more homes on the market, so less scarcity. Buyers might not need to offer more than the asking price, because they could just go buy the more affordable home down the street.
Higher inventory also impacts sellers. When there aren’t many homes on the market, selling becomes a bit of a risk. What if you sell your house and then can’t find a new one to buy? When inventory goes up, though, more sellers feel confident listing their homes. Then this drives inventory even higher — whoo-hoo!
It’s important to note that some other experts don’t see inventory rising, though. They say that there simply aren’t enough existing homes, and new-build construction can’t keep up with demand.
Unfortunately, we don’t have a crystal ball. So, we’ll all just need to keep a close eye on inventory numbers as we move into the 2024 housing market.
So, we’ve set some expectations, but what does this all actually mean?
Well, it’ll all depend on who you are: a buyer, a seller, or a refinancer.
Buyers, have a bottle of bubbly on deck! Potential lower prices, lower interest rates, and more homes on the market? This could seriously improve your prospects.
Just keep in mind that competition tends to rise as a market balances out. After all, if you’re eager to take advantage of these changes, hundreds of thousands throughout the United States in the same situation may be, too.
Make sure your dream homebuying team is completely built out, so you can hit the ground running in 2024.
Looking to sell in 2024? Keep in mind that, if prices do drop, you may need to adjust your expectations a bit.
The pandemic housing market was characterized by sky-high purchase prices and lots of cash deals. Those days are mostly gone. Plus, if inventory rises, you’ll likely be competing with lots of other sellers, too.
You might need to list your house a bit lower than you’d like, or than you’d initially expect. A great real estate professional can help you find the right figure, so everyone wins.
If you’re locked into a higher interest rate, 2024 could be the perfect time to refinance.
Refinance: The process of revising and replacing the terms of your mortgage loan with a new mortgage loan. Basically, trading your old interest rate for a new, lower one.
While rates probably won’t fall anywhere near 2 or 3%, like they did during the pandemic, you could still see significant savings. Experts say that a difference of a percentage point or more could make refinancing worth it.
Just remember that you’ll need to tick some boxes. Talk to a mortgage professional about how the following requirements apply to you:
Loan-to-value ratio: The amount you owe on the home divided by the home’s worth.
No one likely wants to loan you more money than your home is worth! You’ll likely need an LTV ratio of 80%, max.
Debt-to-income ratio: A comparison of how much you pay each month in recurring expenses versus how much you earn. Specifically, the percentage of your gross monthly income (before taxes) that goes towards payments for things like rent, mortgage, credit cards, car payments, student loans or certain other recurring monthly payments. Higher percentages may mean riskier investments for lenders.
You might be able to refinance with a DTI of 50%, but 36% may be a great number to shoot for.
So, are you ready for it?
While we probably won’t see a picture-perfect housing market, it does look like things could be rebalancing a bit in the new year. Whether you’re a buyer, seller, or refinancer, 2024 could mean some serious momentum.
Whatever your situation, ensure you’re ready to jump right in. And remember at your local Motto Mortgage office: we’re always here to help!