You’ve probably heard the adage that says the only consistent thing in life is change. This is true in any line of work, but it’s especially true when you’re involved in real estate.
No one could have foreseen the ripple effects a global pandemic would have in 2020, or the frenzy in real estate it would cause. In the wake of COVID, people all over the country looked at where they lived, and many chose to make a change.
As a result of inflation, mortgage rates rose to their highest levels in more than 20 years – nearly 8%. Because of these increased rates, home sales dropped from their dizzying levels just months prior.
The housing market has continued to be somewhat stagnant, but the recent drop in mortgage rates has caused some housing experts to say 2024 might see a return to a more predictable homebuying cycle.
Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, recently wrote that first-time homebuyers – who have been on the sideline in recent months – might be poised to enter the market.
“Mortgage rates continued to incrementally decline, dropping to 6.67% from 6.95% last week. For a $400,000 home, this is a monthly mortgage payment of $2,059 – a monthly savings of $242 from when rates were at 7.79% in October. Mortgage rates for the 30-year fixed are also nearly a full percentage below the historical average since 1971 of 7.74%.
Lautz continued, writing, “First-time buyers traditionally fare better in the winter, as there’s less competition from families in the homebuying market.
“November’s Realtors Confidence Index shows first-time buyers at 31%, which is up from 28% the previous month. This represents a buying period when mortgage rates were still high. Homebuyers who have been priced out in the last year should find optimism in 2024.”
As Lautz pointed out, these dropping rates mean real money in homebuyers’ pockets. But if these rates keep falling, first-time homebuyers might find themselves in a similar spot to what homebuyers faced in 2020 and 2021: a fast market where multiple offers and cash offers are the norm.
The solution to these issues is increased housing inventory – but there might not be enough properties to satisfy the demand.
The NAR Research Group recently released a study of the markets with the most pent-up housing demand. The report says the current housing shortfall has been accumulating over decades.
“After the mid-2000s housing boom, the U.S. has consistently underbuilt compared to the historical average. Furthermore, with mortgage rates hovering around 7% for most of the year, fewer homeowners opted to list their homes in 2023.
“This rate is nearly 1.7 percentage points higher than the average rate in 2022. Consequently, this long-standing underbuilding issue and the rate lock-in effect continued to keep housing inventory low throughout the year.”
What does this mean to those looking to buy or sell a home in 2024? No one has a crystal ball, but signs are pointing toward a possible return to normal mortgage rates, which means more people will be looking to buy.
This increased activity might also benefit those looking to sell since housing inventory remains lower than the historical average.
In short, buyers need to consider these factors when looking to purchase a home, as well as consult a Realtor to guide them through the process. A Realtor will be your trusted guide during what could be a fast and frantic process.
Realtors work for their clients and communities every day. That’s Who We R.
Founded in 1912, Greater Chattanooga Realtors is the voice for real estate in Greater Chattanooga. A regional organization with more than 2,700 members, Greater Chattanooga Realtors serves Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. The association is one of approximately 1,100 local associations and board of Realtors nationwide that comprise the National Association of Realtors. Greater Chattanooga Realtors owns and operates a multiple listing service that is one of approximately 600 MLSs in the country and that services more than 3,000 users. Local association membership consists of Realtors servicing the Greater Chattanooga area and specializing in a variety of disciplines, including appraisal, commercial, industrial, land, multifamily, property management and residential. Affiliate members who represent related industries in sympathy with the objectives of the association work alongside our Realtors. Our affiliate members include mortgage lenders, home inspectors, title and closing services, pest inspection and control and insurance.