Last December, when the Federal Reserve projected a series of benchmark rate cuts in the coming year, some analysts speculated that mortgage rates—which had recently peaked near 8%—would fall closer to 6% by mid-2024.1,2,3 Unfortunately, persistent inflation has delayed the central bank’s timeline and kept the average 30-year mortgage rate hovering around 7% so far this year.2
While elevated mortgage rates have continued to dampen the pace of home sales and affordability, there have been some positive developments for frustrated homebuyers. Nationwide, the inventory shortage is starting to ease, and an uptick in starter homes coming on the market has helped to slow the median home price growth rate, presenting some relief to cash-strapped buyers.4
There are also signs that sellers are adjusting to the higher rate environment, as a growing number list their properties for sale.4 Still, economists say a persistent housing deficit—combined with tighter lending standards and historically high levels of home equity—will help keep the market stable.5
What does that mean for you? Read on for our take on this year’s most important real estate news and get a sneak peek into what analysts predict is around the corner for 2024.
MORTGAGE RATE CUTS WILL TAKE LONGER THAN EXPECTED
At its most recent meeting on May 1, the Federal Reserve announced that it would keep its overnight rate at a 23-year high in response to the latest, still-elevated inflation numbers.6
While mortgage rates aren’t directly tied to the federal funds rate, they do tend to move in tandem. So, while expected, the Fed’s announcement was further proof that a meaningful decline in mortgage rates—and a subsequent real estate market rebound—is farther off than many experts predicted.
“The housing market has always been interest rate sensitive. When rates go up, we tend to see less activity,” explained Realtor.com chief economist Danielle Hale in a recent article. “The housing market is even more rate sensitive now because many people are locked into low mortgage rates and because first-time buyers are really stretched by high prices and borrowing costs.”7
Many experts now speculate that the first benchmark rate cut will come no sooner than September, so homebuyers hoping for a cheaper mortgage will have to remain patient.
“We’re not likely to see mortgage rates decline significantly until after the Fed makes its first cut; and the longer it takes for that to happen, the less likely it is that we’ll see rates much below 6.5% by the end of the year,” predicted Rick Sharga, CEO at CJ Patrick Company, in a May interview.8
What does it mean for you? Mortgage rates aren’t expected to fall significantly any time soon, but that doesn’t necessarily mean you should wait to buy a home. A drop in rates could lead to a spike in home prices if pent-up demand sends a flood of homebuyers back into the market. Reach out to schedule a free consultation so we can help you chart the best course for your home purchase or sale.
BUYERS ARE GAINING OPTIONS AS SELLERS RETURN TO THE MARKET
Buyers who have been struggling to find the right property may find a silver lining in the current market situation in Denver. More Americans are putting up for-sale signs in their yards, creating an opportunity for buyers to discover a home they love and potentially secure a favorable deal. With record-low inventory levels in recent years, this shift is welcomed by those in search of a new home.
In 2023, the scarcity of inventory persisted as homeowners hesitated to sell due to existing mortgage rates. However, a recent survey by Realtor.com indicates that a growing number of these homeowners are now prepared to enter the market. While a majority still feel constrained by their current mortgage terms, the percentage has slightly decreased from 82% in 2023 to 79% now. Interestingly, nearly one-third of these homeowners express the need to sell soon for personal reasons, with the majority having contemplated selling for over a year already.
There is a sense of renewed optimism in the market as indicators for both a “good time to buy” and a “good time to sell” have shown gradual improvement, as mentioned by Fannie Mae Chief Economist Doug Duncan in a recent statement. Despite this positive trend, the current inventory of available homes remains below pre-pandemic levels, according to economists at Realtor.com. While there has been an increase in inventory compared to the previous years, it is still 35.9% lower than the levels seen in 2017 to 2019.
What does this mean for you in Denver, CO ? If you’ve faced challenges in finding a home before, now might be the perfect time to revisit your search. With an uptick in inventory and relatively low buyer competition, the current market conditions could favor your home-buying journey. Feel free to reach out if you’re ready to start the search for your next dream home.
For those considering selling this year, taking action promptly may be beneficial. As inventory levels potentially rise, it could become more competitive to make your home stand out. We can assist you in devising a strategy to maximize your returns, starting with a professional evaluation of your home’s current market value. Contact Just Livin' Realty Group to arrange a complimentary consultation session.
HOME PRICES SEEING MANAGEABLE GROWTH
Homebuyers grappling with high borrowing costs have reason to rejoice as the national median home price has maintained stability over the past year. This is attributed to an increased presence of smaller, more affordable homes in the market, enhancing options for buyers in Denver.
Aside from the availability of more affordable housing, recent surveys indicate that home sellers are adjusting their pricing expectations. A lower percentage of sellers anticipate bidding wars or selling above the list price, signifying a more balanced market. Despite the increase in inventory, homes are retaining their value, with the median list price growing by 3.8% on an adjusted per-square-foot basis compared to the previous year.
Dr. Selma Hepp, chief economist at CoreLogic, forecasts a gradual rise in home prices throughout the remainder of 2024. This projection aligns with the expectation of more options for buyers due to increased inventory, potentially reducing the intensity of bidding wars. The forecasted market trend suggests continued growth in home values, making real estate investment an attractive avenue for wealth accumulation over time.
What does this mean for you in Denver, CO ? The availability of more affordable homes presents a promising opportunity, particularly for first-time buyers. With the projected growth in home values, investing in real estate could be a prudent decision to build long-term wealth. Get in touch to discuss your aspirations and financial parameters, and let us guide you in taking your initial steps on the property ladder.
DESIRE TO OWN PERSISTS, BUT AFFORDABILITY REMAINS AN OBSTACLE
Recent surveys indicate that the aspiration for homeownership is still strong in America, despite facing financial hurdles. Notably, a survey conducted by Realtor.com unveiled that 55% of Millennials and 40% of Gen Z individuals believe that the current market presents a favorable opportunity to purchase a home.13
Fannie Mae Chief Economist Doug Duncan suggests that buyers are adapting to the evolving economic landscape. Duncan mentioned, “With the era of historically low rates during the pandemic now in the rearview mirror, some households are overcoming the challenges posed by the sharp rate increase last year. This adjustment could potentially stimulate the housing market, as indicated in our latest forecast where we anticipate a gradual rise in both home listings and sales transactions in the upcoming year.”
The same survey from Realtor.com highlighted that even a slight decrease in mortgage rates could significantly boost demand from homebuyers and enhance affordability. Surprisingly, 40% of respondents stated that they would find buying a home feasible if rates fell below 6%, with an additional 32% planning to enter the market if rates dropped below 5%.13
However, waiting for rates to decline is not the sole strategy being employed by Americans to afford a home. A study by U.S. News & World Report revealed that determined buyers are utilizing various tactics, such as consulting multiple lenders (52%), investing in discount points to reduce rates (36%), and opting for adjustable-rate mortgages (36%). Moreover, over three-quarters of current buyers are considering refinancing to secure a lower rate in the future.14
Despite the challenges, these respondents remain resolute in their homeownership goals, citing financial advantages, stability, and increased space as primary motivations for their purchase aspirations.14
What does it mean for you? If you’re envisioning a new home, reach out to us. We can assist you in exploring your options and connecting you with a mortgage expert to discuss effective strategies for enhancing the affordability of your monthly payments. Remember, refinancing may be an option if rates decrease in the future.
If you are planning to sell, it is vital to engage a knowledgeable agent who can optimize your profits and attract qualified buyers. Get in touch to receive a copy of our comprehensive Property Marketing Plan.
WE’RE HERE TO ASSIST YOU
While national real estate reports offer a broad perspective, the dynamics of real estate largely depend on local factors. As experts in your local market, we are well-versed in what influences sales and property values in your specific area. Count on us as your trusted ally in navigating the market’s intricacies.
If you are contemplating a home purchase or sale in CO in 2024, contact us now to arrange a complimentary consultation. Let’s collaborate to formulate a tailored action plan to achieve your real estate objectives.
This content represents an opinion and is for informational purposes only. It should not be construed as financial, legal, or tax advice. Seek the appropriate professional guidance tailored to your specific requirements.
Sources:
- CBS News –
https://www.cbsnews.com/news/federal-reserve-rate-decision-pause-december-13/ - Bankrate –
https://www.bankrate.com/mortgages/historical-mortgage-rates/ - Fannie Mae –
https://www.fanniemae.com/media/50096/display - Realtor.com –
https://www.realtor.com/research/april-2024-data/ - Bankrate –
https://www.bankrate.com/real-estate/is-the-housing-market-about-to-crash/ - NPR –
https://www.npr.org/2024/05/01/1248454950/federal-reserve-inflation-interest-rates - Realtor.com –
https://www.realtor.com/news/trends/will-the-fed-cut-interest-rates-2024-housing-market/ - The Mortgage Reports –
https://themortgagereports.com/32667/mortgage-rates-forecast-fha-va-usda-conventional - Fast Company –
https://www.fastcompany.com/91106568/housing-market-inventory-rising-across-country-maps - Realtor.com –
https://www.realtor.com/research/2023-q1-sellers-survey-btts/ - Fannie Mae –
https://www.fanniemae.com/research-and-insights/surveys-indices/national-housing-survey - CoreLogic –
https://www.corelogic.com/press-releases/corelogic-us-annual-home-price-growth-slows-still-up-by-over-5-february/ - Realtor.com –
https://www.realtor.com/research/america-dream-survey-feb-2024/ - US News & World Report –
https://money.usnews.com/loans/mortgages/articles/2024-homebuyer-survey