Real Estate Market Forecast 2024

Freddie Mac's housing forecast for 2024 looks at several factors that can determine growth in the real estate market. This includes inventory, mortgage rates and the US economy’s performance.

In October 2023, the average 30-year fixed-rate mortgage rose to 7.79%, a 23-year high. Since then, rates have fallen to around 6.6%.

Although inflation decreased significantly during the last two years that the FED began raising rates, it is still above their target rate of 2%. During the last several meetings, they did not increase their rate, which allowed mortgage rates to begin declining. The economy is showing resilience and the stock market is projecting optimism in a strong bull market.

During the last FED meeting, there was no clear indication that they would begin cutting their rate, which is currently at 5.5%. Last year at this time, their rate was at 4.5%. Many forecasters are predicting that we will see interest rates continue to decline in 2024. However, most believe the interest rate for a 30-year mortgage will not fall below 6% any time soon.

Sales Down | Prices Up

Last year, consumer spending was strong and the unemployment rate dropped as more jobs were added. It has been a challenge for the FED to walk the tight rope of managing inflation without creating a recession. Higher interest rates led home sales in 2023 to their lowest point in almost 30 years.

What is unusual is that while home sales were down, home prices reached an all time high. According to the National Association of Realtors, the median home sale price in 2023 was $389,800, up about 1% from 2022. This is because of a lack of inventory, another factor of higher mortgage rates. Would-be-sellers are not going to walk away from their current mortgage rate to take on one that is higher.

Nobody expects the Federal Reserve to start cutting the federal fund rate immediately. It does seem, however, that they won’t be raising their rate in 2024, which is good news for lenders and borrowers. The factors required to bring inflation to 2% may indeed, occur, in which case rates are still expected to stay in the 6% range.

2024 Real Estate Forecast

While falling rates are bringing some buyers back into the market, a lack of inventory will probably keep sales numbers down in 2024. The demand for housing is expected to remain strong with Millennial first-time homebuyers pushing home prices up. Freddie Mac forecasts home prices to increase 2.8% in 2024 and 2.0% in 2025 nationally.

It does seem like more buyers are growing comfortable with a mortgage rate in the 6% range. For those who continue to see if rates will drop further, they may actually lose out. Over the last year, rates have dropped, only to climb back up.

Additionally, the market is less competitive now than it would be if interest rates make a significant downward shift. When more buyers enter the market, home values go up. The amount you may pay for a slightly higher rate now can be offset by a lower purchase price.

It seems that after all of the economic pushing and pulling has settled, a 30-year mortgage in the low to mid 6% range is probably the best we will see in 2024.

Is it Good to Buy Down Points?

A recent article published by Freddie Mac explored whether buying discount points is a good idea to reduce one’s mortgage interest rate. In 2023, 58.8% of purchase mortgage borrowers paid discount points, compared to 31.3% in 2021 and 53.6% in 2022.

What they found is that the interest rate differential between borrowers who pay discount points and those who don’t is very small. In November 2023, buyers who didn’t pay discount points for a loan locked in a rate at 6.69% versus 6.86% for those who did pay points. Because rates can shift week by week, by the time a loan is processed, paying the points up front may not change the rate at all. be wise

Contact me today for more information about homes for sale in North Lake Tahoe and Truckee. I can help you navigate the changing market to purchase your dream retreat at Lake Tahoe.