When you read about the housing market, you’ll probably come across some information about inflation or recent decisions made by the Federal Reserve (the Fed). But how do those two things impact you and your homebuying plans? Here’s what you need to know.

The Federal Funds Rate Hikes Have Stalled

One of the Fed’s primary goals is to lower inflation. In order to do that, they started raising the Federal Funds Rate to slow down the economy. Even though this doesn’t directly dictate what happens with mortgage rates, it does have an impact.

Recently inflation has started to cool, a signal those increases worked and are bringing inflation back down. As a result, the Fed’s hikes have gotten smaller and less frequent. In fact, there haven’t been any increases since July (see graph below):

And not only has the Fed decided not to raise the Federal Funds Rate the last three times the committee met, they’ve signaled there may actually be rate cuts coming in 2024. According to the New York Times (NYT):

“Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.”

This indicates the Fed thinks the economy and inflation are improving. Why does that matter to you and your plans to buy a home? It could end up leading to lower mortgage rates and improved affordability.

Mortgage Rates Are Coming Down

Mortgage rates are influenced by a wide variety of factors, and inflation and the Fed’s actions (or as has been the case recently, inaction) play a big role. Now that the Fed has paused the increases, it looks more likely mortgage rates will continue their downward trend (see graph below):

 

Although mortgage rates may remain volatile, their recent trend combined with expert forecasts indicate they could continue to go down in 2024. That would improve affordability for buyers and make it easier for sellers to move since they won’t feel as locked-in to their current, low mortgage rate.

Bottom Line

The Fed’s decisions have an indirect impact on mortgage rates. By not raising the Federal Funds Rate, mortgage rates are likely to continue declining. Rely on a trustworthy real estate expert to give you expert advice about changes in the housing market and how they affect you.

If you’re thinking about buying or selling a home soon, you probably want to know what you can expect from the housing market in 2024. In 2023, higher mortgage rates, confusion over home price headlines, and a lack of homes for sale created some challenges for buyers and sellers looking to make a move. But what’s on the horizon for the new year?

The good news is, many experts are optimistic we’ve turned a corner and are headed in a positive direction.

Mortgage Rates Expected To Ease

Recently, mortgage rates have started to come back down. This has offered hope to buyers dealing with affordability challenges. Mark Fleming, Chief Economist at First American, explains how they may continue to drop:

“Mortgage rates have already retreated from recent peaks near 8 percent and may fall further . . .”

Jessica Lautz, Deputy Chief Economist at the National Association of Realtors (NAR), says:

“For home buyers who are taking on a mortgage to purchase a home and have been wary of the autumn rise in mortgage rates, the market is turning more favorable, and there should be optimism entering 2024 for a better market.”

The Supply of Homes for Sale May Grow

As rates ease, activity in the housing market should pick up because more buyers and sellers who had been holding off will jump back into action. If more sellers list, the supply of homes for sale will grow – a trend we’ve already started to see this year. Lisa Sturtevant, Chief Economist at Bright MLS, says:

“Supply will loosen up in 2024. Even homeowners who have been characterized as being ‘locked in’ to low rates will increasingly find that changing family and financial circumstances will lead to more moves and more new listings over the course of the year, particularly as rates move closer to 6.5%.”

Home Price Growth Should Moderate

And mortgage rates pulling back isn’t the only positive sign for affordability. Home price growth is expected to moderate too, as inventory improves but is still low overall. As the Home Price Expectation Survey (HPES) from Fannie Mae, a survey of over 100 economists, investment strategists, and housing market analysts, says:

“On average, the panel anticipates home price growth to clock in at 5.9% in 2023, to be followed by slower growth in 2024 and 2025 of 2.4 percent and 2.7 percent, respectively.” 

To wrap it up, experts project 2024 will be a better year for the housing market. So, if you’re thinking about making a move next year, know that early signs show we’re turning a corner. As Mike Simonsen, President and Founder of Altos Research, puts it:

“We’re going into 2024 with slight home-price gains, somewhat easing inventory constraints, slightly increasing transaction volume . . . All in all, things are looking up for the U.S. housing market in 2024.”

Bottom Line

Experts are optimistic about what 2024 holds for the housing market. If you’re looking to buy or sell a home in the new year, the best way to ensure you’re up to date on the latest forecasts is to partner with a trusted real estate agent. 

If you were worried buyer demand disappeared when mortgage rates went up, the data shows there are plenty of interested buyers still out there. The housing market isn’t as frenzied as it was during the ‘unicorn’ years when buyer demand was through the roof, mortgage rates were historically low, and home values rose like we’ve never seen before. But that doesn’t mean the market is at a standstill.

Nationally, demand is still high compared to the last normal years in the housing market and plenty of buyers are making moves right now. Here’s the data to prove it.

Showing Traffic Is Up

The ShowingTime Showing Index is a measure of how frequently buyers are touring homes. The graph below uses that index to show buyer activity over the past eight Octobers:

 

In the graph, the ‘unicorn’ years are shown in pink. You can see demand has dipped some since then. That’s in response to higher mortgage rates. But, when you compare 2023 to the blue bars on the left that represent the last normal years in the market (2018-2019), you can tell buyers are still more active than the norm.

But showing traffic isn’t the only way to see buyer demand is still high. The number of offers other sellers are getting and the average days homes are on the market tell the same story.

Sellers Are Still Seeing Multiple Offers

According to the latest data from the National Association of Realtors (NAR), sellers are receiving an average of 2.5 offers on their houses. Let’s look at how that compares to recent years (see graph below):

 

It’s true that’s fewer than the number of offers sellers were receiving during the ‘unicorn’ years (shown in pink). But compared to last year, the number is up slightly. And it’s higher than it was in the more normal, pre-‘unicorn’ years in the housing market too.

Homes Priced Right Are Selling Fast

And it’s not just that sellers are still typically getting multiple offers more than the norm, they’re also seeing their homes sell fast. That’s a direct result of strong buyer demand. According to Zillow:

“. . . low inventory levels are spurring surprisingly strong competition . . . demand has remained resilient, and attractive, appropriately priced listings are moving quickly.”

To help showcase that homes for sale are still going quickly, let’s look at data from NAR on the median days on market for this same time of year from 2018 through now (see graph below):

  

As the graph shows, this year homes are sitting on the market only slightly longer than they were during the frenzy of the ‘unicorn’ years. And compared to the last normal years in the market, homes are still selling much faster than they did back then. That’s good news for sellers because it means there are eager buyers out there right now.

Bottom Line

You haven’t missed your chance to sell at a time when sellers are receiving multiple offers, and homes are selling fast. When you’re ready to sell your house, connect with a local real estate agent to get the ball rolling.