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The U.S. housing market faces a triple affordability challenge: low inventory, rising prices, and rising mortgage rates. So what does that mean for buyers and sellers?!
Here are three things to know about the 2024 housing market.
#1: Stock
People are spending more time at home. Thank you baby boomers! A lack of homes for sale and high housing costs are just some of the reasons people don’t move. Existing home sales reached their worst levels in decades last year as rising interest rates and rising home prices stalled affordability.
The imbalance between supply and demand will continue this year. At the current sales pace, he has 3.2 months worth of unsold inventory. The outlook is for a healthy market with at least six months’ worth of inventory.
Despite tight inventory in the resale market, the new home market remains attractive. Redfin reported that new construction made up nearly 32% of single-family homes for sale, the highest level in the last quarter.
But inventory is only part of the story. There is also the dilemma of housing prices.
#2: Housing prices
With home prices at an all-time high, buyers are wary, but sellers are elated. The median home price was about $361,000, up 5% from a year ago, Redfin reported.
House prices remain elevated due to pressure from limited housing supply.
According to a report by the National Association of Realtors, home prices fell 6.7% in December compared to the same month last year.
Despite soaring prices, builders have been able to take advantage of low inventory on the resale market and offer discounts and other incentives to buyers. The median sales price for new homes fell 6% from a year ago to $434,000.
But home prices don’t seem to be leveling off any time soon. New home prices are expected to rise 2.2% this year, while existing home prices are expected to rise 3.1%, according to Wells Fargo data.
#3: Mortgage interest rate
Another reason for limited housing supply is the lock-in effect.
At least — 80% of homeowners — have a mortgage // With home interest rates below 5% nationally in Q3 2023, today’s high interest rate environment is making it difficult for homeowners to buy another home. Preventing you from selling or buying.
Interest rates have nearly doubled since the pandemic, thanks in part to the Federal Reserve’s efforts to combat inflation. Inflation remains stubborn and interest rates remain elevated. Last year, mortgage rates exceeded 8% in October, but are now back in the 6% range.
The average mortgage rate for a 30-year fixed loan rose to 6.7% from 6.64% last week, according to Freddie Mac data. There’s not much grace there.
By contrast, home builders were able to win the housing recovery by offering buyers what they wanted: mortgage interest rate buybacks.
New construction is the place to be in this housing market, as builders prepay costs to lower loan rates.
Economists expect the housing recovery to stall in the coming months, given that long-term interest rates are rising again this year. However, this hiatus is likely to be short-lived.
How will this economic situation play out over the remaining 20 to 24 years?
Yahoo Finance continues to break down everything you need to know about the housing market this year, so stay up to date on the latest developments.
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