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After a tumultuous 2023, Realtor.com Chief Economist Daniel Hale joined Yahoo Finance Live to assess the outlook for the housing market for prospective buyers in 2024 as interest rates continue to fall.
According to a Realtor.com survey, 61% of first-time homebuyers feel “very optimistic” about purchasing in 2024, and 95% ultimately plan to purchase despite affordability challenges. I’m sure you can own it. Hale notes that fluctuations in mortgage rates can make planning difficult, but advises buyers to create an “interest-proof” budget that takes into account changes in interest rates and prices. Rising interest rates suppressed demand last year, but the recent downward trend is “fueling optimism” about the possibility of new access, she said.
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by angel smith
video transcript
– Meanwhile, the housing market will stagnate in 2023 due to a decline in sales volume, high prices, and tight inventory. But a new report released today highlights the best markets for first-time buyers in 2024. To learn more about the report, we spoke to one of its authors, Daniel Hale, chief economist at realtor.com.
Daniel, nice to meet you. Daniel, you guys actually surveyed potential first-time home buyers. What do they have to tell you heading into 2024? Are they becoming more optimistic?
Daniel Hale: absolutely. So first-time homebuyers told us they were actually quite optimistic. In a recent realtor.com survey, 61% said now is a good time to buy a home. He added that although affordability remains an issue, although there has been some improvement due to lower mortgage rates, 95% of first-time homebuyers will not own a home in their lifetime. I feel that I can buy it. 40% say they are making plans and expect to be able to purchase within the next year. So first-time homebuyers have a lot of optimism for the 2024 market.
– Hi Daniel. This is Julie. What should people think about the ups and downs like we’re seeing in mortgage rates? Yes, we know the long-term trend is a little bit lower. But there’s some volatility there. So how do homebuyers go about it?
Daniel Hale: Volatility can make it very difficult for homebuyers to plan their purchase, as it is very difficult to set a budget when mortgage rates rise or fall. So my recommendation or advice to consumers is to really evaluate your budget and consider a few different scenarios. For example, if you compare October’s highest mortgage rate of 7.79% to his lowest rate at the end of December, these can have a fairly wide-ranging impact on your budget. Every $100,000 you borrow means a difference of $80 a month.
So it’s worth for homebuyers to consider how much changes in mortgage rates will affect their returns and how aggressively they want to set their target price when looking for a home. If mortgage rates rise more than expected, could you stretch your budget a bit? Or should you lower your price target to have some flexibility if mortgage rates rise?
– Daniel, when you surveyed potential first-time homebuyers about affordability issues, what did they tell you?
Daniel Hale: Well, buyers are optimistic that they can afford the home. And there’s no doubt that lower mortgage rates are fueling that optimism. Therefore, they expect to be able to afford to buy a home within the next year.
That’s one reason why we focused on areas with affordable housing in our best market reports for first-time homebuyers. We looked at the price-to-income ratio as a good indicator of an area’s affordability, especially among young households, which tend to be first-time homebuyers. But we also looked at things like the availability of housing on the market, restaurants, and the presence of nightlife and cultural activities that young people might want to take advantage of. And of course, with the return to work becoming a social phenomenon, no one wants to spend forever getting to the office, so we looked at commute times.
– The first city on your list, I don’t know how to pronounce it either, Daniel. I know it’s near Rochester. But, it’s interesting. It’s definitely a place – there are many places I’ve never heard of.
Daniel Hale: Yes, Irondequoit, New York is located in Rochester.
– Iron decoit.
Daniel Hale: – Metro –
– got it.
Daniel Hale: – area. that’s right. And for this report, we looked at cities and towns within the metropolitan area. Therefore, we were able to identify entire metropolitan areas. But we know that young people are everywhere, so it’s often more helpful to find more affordable spots within a larger metropolitan area. First-timers are everywhere.
So we’re looking for little gems of hidden opportunity and trying to bring them to the surface for first-time buyers. In addition to Irondequoit, there are many small towns and cities in the Northeast. However, the list also shows regions in the South and Midwest.
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