Mortgage Rates, Inventory Levels, and Home Prices
Mortgage Rates and Inventory
We're expecting some significant shifts in mortgage rates soon. As inflation slows and the Federal Reserve potentially lowers interest rates later this year, mortgage rates are anticipated to improve. Forecasts suggest the average rate for a 30-year fixed mortgage will be between 6% and 6.5% by the end of 2024. Lower borrowing costs should encourage more sellers to list their properties and spur new construction. Currently, 90% of markets have seen improved inventory levels year over year.
Stabilizing Home Prices
With more homes available, home prices are expected to stabilize, growing around 2% to 3% annually. While it's not quite a buyer's market yet, homebuyers now have more negotiating power. The market is less competitive than during the pandemic, allowing buyers to negotiate prices more and avoid waiving inspections or appraisals. Sellers might also offer to buy down mortgage rates to close deals.
Gradual Changes Preferred
A slow adjustment in mortgage rates and home prices is preferable to sudden changes. A sharp drop in rates could bring a surge of buyers, driving prices up once again. Ideally, both rates and prices will move toward equilibrium steadily, preventing new market imbalances.
Economic and Political Factors
The market's future will depend on economic factors like the labor market and political policies, especially with the upcoming general election. These factors will significantly influence housing demand, prices, and overall market stability.