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Mortgage rates increased this week. But the latest news from the Federal Reserve suggests that we could see them start to tick down in the coming months.
On Wednesday, the Fed announced that it will keep the federal funds rate steady as it waits for more data showing that inflation is nearing its 2% goal. The central bank also released the latest Summary of Economic Projections, which showed that Fed officials still expect to cut rates three times this year. This would likely lead to lower mortgage interest rates as well.
Average 30-year mortgage rates increased 13 basis points to 6.87% this week, according to Freddie Mac. Average 15-year rates also inched up to 6.21%.
“After decreasing for a couple of weeks, mortgage rates are once again on the upswing,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “As the spring homebuying season gets underway, existing home inventory has increased slightly and new home construction has picked up. Despite elevated rates, homebuilders are displaying renewed confidence in the housing market, focusing on the fact that there is a good amount of pent-up demand, an ongoing supply shortage, and expectations that the Federal Reserve will cut rates later in the year.”
The Fed could start cutting rates as soon as its June meeting, according to the CME FedWatch Tool. This would remove some of the upward pressure off of mortgage rates and allow them to trend down a bit.
But it will likely be a while before we see affordability improve significantly. If you’re waiting for rates to drop before you start the homebuying process, you may have better luck later this year or in 2025.
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30-Year Fixed Mortgage Rates
Last week’s average 30-year fixed mortgage rate is 6.87%, according to Freddie Mac. This is a 13-basis-point increase from the previous week.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates.
15-Year Fixed Mortgage Rates
Average 15-year mortgage rates inched up to 6.21% last week, according to Freddie Mac data. This is a five-point increase since the week before.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
How Do Fed Rate Hikes Affect Mortgages?
The Federal Reserve has increased the federal funds rate dramatically to try to slow economic growth and get inflation under control. So far, inflation has slowed significantly, but it’s still a bit above the Fed’s 2% target rate.
Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
The Fed has indicated that it’s likely done hiking rates and that it could start cutting soon. This will likely allow mortgage rates to trend down later this year.
When Will Mortgage Rates Go Down?
Mortgage rates increased dramatically over the last two years, but they’ve moderated somewhat in recent months, and are expected to drop further this year.
In February 2024, the Consumer Price Index rose 3.2% year-over-year. Inflation has slowed significantly since it peaked last year, which is good news for mortgage rates. But it has to slow further before rates will begin to fall.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
Amid a housing shortage and an affordability crisis, US homebuilding heated up in February as builders anticipate demand for new homes to stay strong.
One sure way to improve affordability is to increase the availability of apartments to rent and homes to buy. In areas of the country where there has been robust homebuilding, rents and home price increases have been more moderate.
The pace of new housing starts soared by 10.7% in February from the month before, after slumping in January, according to data released Thursday by the Census Bureau and the Department of Housing and Urban Development.
Starts rose to a seasonally adjusted annual rate of 1.521 million units last month, beating analysts’ estimates of 1.425 million. The pace rebounded from January’s revised pace of 1.374 million and was 5.9% above the 1.436 million pace a year ago.
Meanwhile, the pace of new building permits was up 1.9% from January, which was up 2.4% from a year ago.
Homebuyers look to new construction for much-needed inventory
While the number of existing homes on the market remains historically low, new construction has provided a critical alternative for homebuyers.
Mortgage applications for a newly constructed home were up a whopping 15.7% in February from a year ago, according to the Mortgage Bankers Association; and up by 1% from January. The average loan size jumped to its highest level since last March at almost $406,000, but it was still below the record high of more than $436,000 in April 2022.
“It is possible that we could see more wiggle room on pricing in the coming months, as the inventory of existing homes begins to expand,” said Lisa Sturtevant, chief economist at Bright Multiple Listing Service, in a statement.
Prospective homebuyers who are looking at new construction are still finding some builders offering concessions, upgrades, or favorable financing terms, she said.
But, according to the NAHB, fewer builders are offering price cuts.
Homebuilders are preparing for when rates are lower
The much lower mortgage rates that many homebuyers expected have yet to materialize, but builders want to be ready for when that does happen.
Mortgage rates have come down from their highest levels of last year — 7.79% in October — and are now about a full percentage point below that, at 6.74%.
“Lower mortgage rates are likely to bring buyers to the market in larger numbers, and builders are ramping up supply to meet this demand,” said Kelly Mangold of RCLCO Real Estate Consulting, in a statement.
While existing home inventory has ticked up lately, as is typical this time of year, there is still a historically low number of homes on the market as owners see the gap between their ultra-low rate and prevailing rates as still too wide.
That creates an opportunity for homebuilders who can provide inventory.
“Homebuilders continue to be bullish about the spring market as homeowners are still reluctant to list their homes for sale and new homes account for an outsized share of the active inventory,” said Sturtevant.
Homebuilder confidence improved this month even as mortgage rates climbed, according to a survey from the National Association of Home Builders released Monday.
The lack of existing inventory that continues to push buyers toward new home construction led homebuilder sentiment index to the highest level since July and marked the fourth consecutive monthly gain for the index.
Addressing the housing shortage
Housing affordability amid high inflation and elevated interest rates remains a hot-button issue for the White House as well as the Federal Reserve.
President Joe Biden is set to address the housing shortage Tuesday in a speech from Las Vegas, where the cost of rent has increased 30% from before the pandemic and the cost to buy a home has risen by over 40% since then.
Biden is expected to call on Congress to pass legislation that he says could result in the building and renovation of more than 2 million homes to close the housing supply gap and lower housing costs.
Housing experts agree there are not enough homes available to rent or own compared to the demand. But the size of that gap ranges from a shortfall of 1.5 million units (according to National Association of Home Builders) to 5.5 million units (according to the National Association of Realtors) or as many as 7 million (according to the National Low Income Housing Coalition and Realtor.com), depending on who is calculating it and what assumptions about housing are being made.
The much-anticipated Consumer Price Index (CPI) was released this week. For those seeking evidence that inflation will soon be back at the Fed’s target level, it wasn’t the triumph it might have been. Even so, rates managed to move lower.
Mortgage rates and, indeed, most rates are determined by trading levels in the bond market. Bond yields/rates move higher when inflation is high, and the market has been waiting on signs of lower inflation before trading in a way that allows interest rates to move lower.
The Consumer Price Index (CPI) is the biggest name in monthly inflation reports. It’s caused big reactions in rates many times over the past few years. In recent months, it’s been showing more and more promise regarding a return to inflation levels that would allow for significantly lower rates.
But CPI has given false hope before, so traders are wary. This week’s report definitely stopped short of providing resounding confirmation that inflation is defeated. That said, it didn’t send any signals that were too troubling either.
With that in mind, it’s not too surprising that rates actually didn’t move much in response to CPI. If anything, the initial impulse was toward slightly higher rates. It wasn’t until the following day’s Producer Price Index (PPI) that bond traders saw better evidence of calmer inflation. Both CPI and PPI have been moving lower, but PPI is now all the way back down to target levels.
The following chart shows how 10yr Treasury yields (which tend to correlation with mortgage rate movement) were reacting throughout the week:
Note the initially bad reaction to CPI. There was a recovery that same afternoon for a variety of potential reasons. At least one of those reasons had to do with speculation that the Fed is still on track to deliver a series of rate cuts this year in addition to making rate-friendly changes to the way it’s managing its bond portfolio. Fed policy expectations are even easier to see when we look at actual Fed Funds Rate expectations which are now at the lowest levels since July.
Mortgage rates don’t correlate perfectly with Fed Funds Rate expectations (one reason we often advise that a Fed rate cut/hike doesn’t mean a mortgage rate cut/hike). As such, they’re not back below the recent lows, but they definitely haven’t moved much higher. This week’s gentle descent means we’re continuing to hold a vast majority of the improvement seen in Nov/Dec.
Looking ahead, while next week doesn’t have any economic data on the same level as CPI, Wednesday’s Retail Sales report can definitely move the needle. It’s expected to improve slightly to 0.4% month over month after hitting 0.3% last time.
Beyond the data, we’ll hear from several Fed speakers and there’s been some speculation that Waller’s appearance at the Brookings Institute will bring some important concepts regarding the precursors for friendlier rate policy in 2024. That will happen on Tuesday, which is the first business day of the week next week due to the Martin Luther King Jr. holiday.
While not as much of a factor for interest rates, we’ll also get updates on several key housing metrics including new home construction, builder confidence, and Existing Home Sales.
There’s cautious optimism in the air among area real estate professionals looking into the 2024 home sales market.
If trends continue, they see mortgage rates going down and listings going up.
The key word is “if.”
“Looking ahead to 2024, we anticipate mortgage interest rates to settle in the 6% range, which will attract even more buyers into the market, especially come spring,” said Jeanette Schneider, president of Re-Max of Southeastern Michigan.
“Current homeowners who held onto their home due to a favorable interest rate may decide their interest rate isn’t worth keeping a home that no longer meets their needs, and that should bring a bit more inventory to the market.”
Adds Karen Kage, chief executive officer of Realcomp II Ltd., Michigan’s largest multiple listing service: “We are hopeful for interest rates to continue to trend downward in the new year and consumer confidence levels to rise. As we stand today and look ahead, those are, perhaps, the biggest factors in determining what we might see in 2024.”
Nationally, industry analysts and veterans offer a range of predictions for the upcoming year. Among those:
• Buying a new home will remain expensive, according to Zillow, while Redfin said the median sale price could retreat by 1% in 2024
• The market will still be challenging for first-time homebuyers, but an influx of new apartment units could help manage inflation, according to Lawrence Yun, chief economist for the National Association of Realtors
• Sales of existing homes will rebound in 2025, with home-buying costs leveling off in the second half of 2024, according to investment banker Goldman Sachs
• In Michigan, tech startup real estate tracker Houzeo predicted home sellers will return to the market in 2024 and interest rates will stabilize in the second half of the year.
Locally, Schneider predicted a “slight uptick in home sales in 2024, along with a steady, but moderate increase, in home prices.”
“As boomers consider downsizing, we expect to see more cash offers in the market, providing a challenge for first-time buyers,” she said.
The Press & Guide asked area real estate specialists — with a combined experience of more than seven decades — to size up the market for the next year.
Interviewed for this story are:
• Susie Armiak, Realtor, MBA Realty Powered by Real Estate One, Grosse Ile, three years experience as a licensed Realtor and more than 25 years as a residential home builder
• Eric Blaine, associate broker and branch manager, Dearborn Office, Real Estate One, 10 years experience
• Tracey Solomon, Realtor, Re/Max Masters, Davis/Solomon Realty Group, Flat Rock, more than four years experience
• Maria Starkey, Realtor, Starkey Team, MBA Realty, Grosse Ile, 24 years experience. Also contributing: Michael Starkey, Realtor
• Benjamin Welch, associate broker, Century 21 Curran & Oberski, Dearborn Heights, 18 years experience, including owning and operating Street Rock Management (property management) for five years
Susie Armiak
Eric Blaine
Tracey Solomon
Michael and Maria Starkey
Benjamin Welch
Here are edited excerpts of their comments about the year ahead:
Q: Strong demand and tight inventory have defined the real estate market in 2023. How do you see those factors and others shaping the 2024 home sales market?
Armiak: I believe we will continue to see that same trend. Specifically because the higher interests this past year had many sellers/buyers sitting on the fence and new home construction is still behind the demand.
Blaine: Inventory has begun to rise in many markets and is expected to continue that trend in 2024. We expect demand to remain high, as well, and rising inventory will help.
Solomon: Demand is still outpacing supply. Unless this changes, we can expect more of the same seller-weighted market. Election years are historically slower as buyers and sellers may feel unsure about changing economic policy. Post-election, the market typically stabilizes. I suspect that if demand remains high and inventory low, we may not see that expected slowdown. It would be offset by the continued supply/demand pressure.
Starkey: The current market of strong demand and tight inventory is expected to continue into 2024. More buyers than houses continue to be the trend. This is keeping prices in the Downriver market on the high end for homes that are well-maintained and updated. The year ahead will likely continue to be a seller’s market. Homes in need of updating or with deferred maintenance tend to sit on the market longer, resulting in lower noncompeting offers.
Welch: Predicting the 2024 housing market is like forecasting the weather in Michigan – it’s an assumption with a dash of optimism. If interest rates remain the same, the days a home is on the market will continue to increase.
Q: Mortgage interest rates exceeded 7% in 2023. Where do you see mortgage rates in 2024 and how will that affect sales?
Armiak: The most recent Fed meeting stated they would be dropping interest rates three times in 2024 and we are already noticing the benefits of the recently lowered rate, currently at 6.6% for a 30-year fixed rate. (That rate may vary for buyers based on credit score, income and down payment amount.) This rate drop will entice sellers and buyers to make their move. My advice is the sooner the better because it’s going to be crowded in the marketplace once again. Be prepared to make swift and decisive decisions.
Blaine: Rates have held steady for a while and even declined slightly. I expect rates to hold somewhat steady in 2024, allowing more consumers to get off the fence and jump back in the market.
Solomon: Mortgage rates seem to be slowly dropping, which is great news for buyers and sellers. If rates continue to decline, more buyers will enter the market and demand will (again) increase. That will mean a continued shortage of homes and continued pressure on buyers to offer incentives to encourage sellers to accept their offers (fewer contingencies, appraisal guarantees, etc.)
Starkey: Interest rates are anticipated to come down into the 6% range in 2024, which likely will bring more buyers into the market. This may encourage more sellers to list their homes for sale. However, I expect home values will stay steady as demand for homes is expected to continue.
Welch: Increasing interest rates have been a major topic of discussion this year. It appears the Federal Reserve is done with rate hikes and Fannie Mae announced that interest rates could drop into the 6% range by the second quarter. If that happens, I expect a flurry of buyers to hit the market and for home prices to continue to rise.
Q: What is your best advice to potential home sellers for 2024?
Armiak: Connect with an experienced Realtor now to generate your personal marketing strategy. There are multiple items that need to be addressed prior to listing your home. Being prepared will put you in the best position to achieve your goals.
Blaine: It is a great time to sell. Values are up and demand is high.
Solomon: Once you’ve found an agent you trust, listen to their advice. Prepare your home for sale, but don’t overdo it. Timing is everything. Waiting to list until it’s perfect can cost you thousands. Consult your listing agent to prioritize your timing and task list. Utilize a pricing strategy that’s proven effective.
Starkey: Consider taking care of any potential deferred maintenance that could bring down home value. Also, be proactive by having a private home inspection done in advance to address any issues that may come up in a buyer’s private home inspection. This can reduce obstacles throughout the transaction. Last, minimize clutter, reduce excess furnishing that may make the space look smaller and — most importantly — provide a clean home for buyers to tour.
Welch: My advice is to hire a professional so you know all of your options. A professional Realtor will provide guidance, resources and a proven plan to facilitate the sale.
Q: What is your best advice to potential home buyers in 2024?
Armiak: Connect with an experienced Realtor now and begin the pre-approval process with your mortgage lender. It generally takes three months from start to finish. The more prepared you are, the stronger your chances are of getting the home of your dreams. And remember, you can always refinance, but you can’t retrofit the home appreciation value as they continue to rise at an annual rate of 4.7%, per FHFA reports.
Blaine: With value rising — a trend we expect will continue — now is the time to buy before values rise more. Waiting will only cost more and interest rates will not drop enough to help overcome appreciation.
Solomon: Find an agent you trust and communicate your needs and wants. Be financially prepared; your pre-approval matters. Set a home budget that works for your life, not just your balance sheet. Love to travel? Eat out? Give charitably? Factor that in. Adjust your price point to accommodate. (Yes, I’m suggesting you spend less so you can live more.)
Starkey: Get into the market early. Homes are hitting the market every day — not just in spring. Buyers who get a head start should have less competition than those who wait for more homes to choose from. If potential buyers find a home they love, go for it. If interest rates come down, you can always refinance. There are mortgage companies that offer a “no fee” refinance within the first two years of purchase.
Welch: If you are waiting for interest rates to come down before buying a home, it’s time to rethink your strategy. It is best to buy now because if interest rates drop, the number of buyers competing for the home you want will increase significantly, making it more challenging to buy that home.
Q: What communities do you see as most active for home sales in 2024 and why?
Armiak: I believe all communities will enjoy accelerated activity with the promise of lower interest rates, including those looking for second homes and investment properties. We are already seeing an increase in new listings in what is typically known as a quieter time. However, driving factors will continue to be the usual suspects: marriage, family growth, job change, death and divorce.
Blaine: Southeast Michigan markets, including Dearborn, are going to continue strong sales in 2024.
Solomon: Flat Rock, Woodhaven, Wyandotte and Southgate. All show increased values and searches. “Most active” is a hard metric to use as a measurement. A small community won’t show big sales numbers. However, highly rising values and quick list-to-pending sales dates show they are desirable and likely selling at or above asking with appraisal guarantees. Grosse Ile is a good example.
Starkey: The current market of strong demand and tight inventory is expected to continue into 2024. More buyers than houses continue to be the trend. This is keeping prices in the Downriver market on the high end for homes that are well-maintained and updated. The year ahead will likely continue to be a seller’s market. Homes in need of updating or with deferred maintenance tend to sit on the market longer, resulting in lower noncompeting offers.
Starkey: All Downriver communities will be active for home sales in 2024. The communities with more affordable housing for first-time buyers may see more activity as those buyers get away from renting. Of course, we need homes to come up for sale. Many homeowners are getting older and either moving to warmer climates or looking for less housing maintenance. Investors also like to purchase homes to add to their rental portfolio or to renovate and sell. The “step up” housing may not be as active as many of those homeowners are enjoying 2% to 4% interest rates and are feeling very comfortable with their current housing costs.
Welch: During November in the Downriver area, the number of homes for sale declined by 32% compared with previous months. It’s still a competitive market. With interest floating around 7.5%, there are many buyers just sitting on the bench waiting for rates to come down before they make their move. Imagine what it will be like if, and when, that happens.
Mortgage rates began dropping steadily in the last months of 2023, down to 6.61% for a 30-year, fixed-rate loan in the last days of the year, according to data from Freddie Mac.
But 85% of American homeowners remain locked into pre-pandemic mortgage rates of 5% and lower, making them hesitant to sell their home only to purchase another when both home prices and interest rates remain elevated.
Mortgage experts, however, predict that the market may shift in 2024, although not as dramatically as some would hope.
“Mortgage rates will fall to about 6.6% by the end of 2024. The gradual decline in rates combined with the small dip in prices will bring homebuyers some much-needed relief,” Redfin Chief Economist Daryl Fairweather told USA Today.
Jeff Taylor, founder and managing director at Mphasis Digital Risk, agreed that 30-year fixed rates will stay will in the “mid-6%” range.
National Association of Realtors chief economist Lawrence Yun made a bold prediction regarding the market. “A marked turn can be expected as mortgage rates have plunged in recent weeks,” he said.
However, even with interest rates falling, the lack of single-family homes on the market may keep prices elevated.
“While single-family housing starts have steadily increased throughout 2023, it will take years of accelerated new home construction to narrow the supply shortage gap from more than a decade of underbuilding,” Odeta Kushi, Deputy Chief Economist at First American, told USA Today.
Further, with existing homeowners refusing to sell because interest rates won’t match what they secured pre-pandemic, the housing shortage is destined to continue through 2024.
The rising costs of home insurance is also deterring new homebuyers, according to a recent Newsweek article. Real estate investors told the publication that it may be harder to get a mortgage in states like Florida, which is prone to extreme weather such as hurricanes, floods and tornadoes. If you can’t insure a home, you can’t secure a mortgage for its purchase. Current homeowners may experience rate hikes, too, but once a home is insured, it’s easier to maintain a policy than to write a new one.
California, Louisiana, Texas and Colorado also experienced rate hikes in 2023, as previously reported by GoBankingRates. Other states may be susceptible to future rate hikes, according to HUB Private Client research. These states include Minnesota, Missouri, Indiana and South Dakota, which is alarming as they were not previously considered areas at high-risk of weather-related claims.
But even with rising costs, 2024 could be the first year the U.S. sees an uptick in new home construction, as predicted by Robert Dietz, Chief Economist for the National Association of Home Builders.
“Due to low existing inventory, new construction has increased to approximately one-third of total single-family inventory in recent months when historically it was only 10% to 15%,” he said.
After declines in 2022 and 2023, the increase in new construction could help alleviate some of the housing shortage. But even an increased inventory of new homes won’t make a significant difference in the housing market for 2024. “Home prices keep marching higher,” Yun told USA Today. “Only a dramatic rise in supply will dampen price appreciation.
Multiple headwinds kept buyers and sellers on the sidelines of the housing market this year.
But that could change as interest rates fall and builders keep adding inventory.
These are Wall Street’s top predictions for where the US housing market is headed in 2024.
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Rising prices and steep borrowing costs in the US housing market kept homebuyers in a year-long limbo, with a national property shortage adding to headwinds in the sector.
While home prices dropped sharply through 2022, they rallied for nine-straight months beginning in January, recently hitting fresh all-time highs. Meanwhile, as the Federal Reserve raised borrowing costs, mortgage rates jumped to levels not seen sine the mid-2000s.
Finally though, conditions appear poised to shift, especially given mounting bets that the Fed will loosen monetary policy in 2024.
From supply to price growth, here are top experts’ outlooks for 2024 housing market.
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Realtor.com: A “bit of a break”
As the Fed turns dovish, the 30-year fixed mortgage rate will average 6.8% next year, Realtor.com predicted in early December. In the last week of the month, the rate slid to 6.61%.
This could have the effect of slowing demand as homebuyers feel less pressure to race against higher borrowing costs. The listing agency expects prices to dip by 1.7%, having risen 3% in 2023.
“It will be a bit of a break after what have been pretty relentless home price increases,” Chief Economist Danielle Hale said, adding: “Some of the pressure and sense of urgency will start to let up.”
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However, the volume of existing homes for sale will tumble 14%, as the mortgage rates at the level the firm predicts will still be more expensive than what 85% of current borrowers are paying.
Goldman Sachs: Inventory picks up
Goldman Sachs estimates existing sales will only dip slightly in 2024, before rebounding to 4.24 million the year after. Meanwhile, new home sales will climb from this year’s 680,000 to 723,000 in 2024.
That’s as housing starts will inch higher, climbing from 1.39 million to 1.335 million in 2024. New home construction has substantially increased this year, as homebuilders jumped on the lack of housing.
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The bank expects muted price growth next year.
Redfin: Prices will fall 1%
The 30-year mortgage rate will average 6.6% by the end of 2024, leading to a 1% drop in home prices, the real estate firm expects.
“Home prices will still be out of reach for many Americans, but any break in the affordability crisis is a welcome development nonetheless,” Chief Economist Daryl Fairweather said.
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Meanwhile, home sales will jump 5%, reaching 4.3 million. Still, Redfin says high costs will push rent demand higher, while there could be an uptick in priced-out Americans moving in with their parents.
Zillow: Prices will flatten
Buyers shouldn’t expect home prices to fall much, but the rate of growth will level off and allow Americans’ incomes to catch up, the real estate platform predicted in a late-November note.
Mortgage rates will probably hold at current levels in the coming months, as the persistent slowdown in inflation makes an uptick in rates unlikely.
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“Taken together, the cost of buying a home looks to be on track to level off next year, with the possibility of costs falling if mortgage rates do,” Zillow researchers said.
Fannie Mae: Price growth will lose steam
Mortgage rates will average 6.7% in 2024, not far off levels seen this summer, the government-sponsored mortgage finance agency predicted.
Total home sales will jump to 4.8 million, fueled by a gradual recovery in existing home sales, Fannie Mae said. A modest economic downturn will cause a shallow decline in new home sales, though the contraction won’t diminish construction volumes in the long run.
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The agency expects prices to continue appreciating, albeit at a slower pace. Citing an October survey, it forecasts 2.4% price growth next year.
Mortgage rates stayed below 7% for the second week in a row, a welcome relief after a 17-week streak of above-7% rates. This week’s dip is the largest weekly drop since November 2022.
The 30-year, fixed mortgage rate averaged 6.67% for the week ending Dec. 21, according to Freddie Mac‘s Primary Mortgage Market Survey. That’s down from last week’s 6.95% and up from 6.27% the same week a year ago. Meanwhile, HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate on conventional loans at 6.68% on Thursday.
“Lower rates are bringing potential homebuyers who were previously waiting on the sidelines back into the market and builders already are starting to feel the positive effects,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “A rise in homebuilder confidence, followed by new home construction reaching its highest level since May, signals a response to meet heightened demand as current inventory remains low.”
Lower rates will have a positive impact on affordability, Lisa Sturtevant, chief economist at Bright MLS, said in a statement. Bright MLS forecasts the average on a fixed-rate mortgage rate to fall to 6.5% by mid-year and to decline further to 6.2% by the end of next year. With a rate of 6.2%, the typical monthly payment on a loan for a $400,000 home would be about $2,700, down from $3,000 with a 7.5% rate.
Another obstacle? Lack of inventory
The scarcity of available homes has kept home prices elevated. In 2023, many first-time homebuyers had to delay their home-buying plans as they scrambled to save enough money for a downpayment. They often had to bid on multiple houses before being successful, Sturtevant said. Some prospective homebuyers were simply priced out of the market.
“While declining rates is a positive for homebuyers, the lack of inventory—both because of a deficit of new construction and because existing homeowners are remaining in the homes longer—will continue to be a challenge in 2024,” Sturtevant said.
Mortgage rates fell for the eighth week in a row, staying well below 7%, providing a much-needed boost to the U.S. housing market.
The drop in the 30-year fixed-rate mortgage was the biggest in over a year. The 30-year averaged 6.67% as of December 21, according to data released by Freddie Mac
FMCC,
+8.33%
on Thursday.
It’s down 28 basis points from the previous week — one basis point is equal to one hundredth of a percentage point.
A year ago, the 30-year was averaging at 6.27%.
The average rate on the 15-year mortgage was 5.95%, down from 6.38% last week. The 15-year was at 5.69% a year ago.
Freddie Mac’s weekly report on mortgage rates is based on thousands of applications received from lenders across the country that are submitted to Freddie Mac when a borrower applies for a mortgage.
Separate data by Mortgage News Daily said that the 30-year fixed-rate mortgage was averaging at 6.64% as of Thursday afternoon.
What Freddie Mac said: “Lower rates are bringing potential homebuyers who were previously waiting on the sidelines back into the market and builders already are starting to feel the positive effects,” Sam Khater, chief economist at Freddie Mac, said in a statement.
“A rise in homebuilder confidence, followed by new home construction reaching its highest level since May, signals a response to meet heightened demand as current inventory remains low,” he added.
What are they saying? “While declining rates is a positive for homebuyers, the lack of inventory—both because of a deficit of new construction and because existing homeowners are remaining in the homes longer—will continue to be a challenge in 2024,” Lisa Sturtevant, chief economist at Bright MLS, said in a statement.
The housing market may have its ups and downs, but one thing never changes: Families need a place to call home, a place where memories can be made every day. The Bank of the Pacific home loans team does more than just crunch numbers or sift through the many paperwork-heavy steps of pre-qualification, purchase and closing. They strive to build lasting relationships that extend generations.
Through Thick and Thin, Bank of the Pacific Helps Find Your Dream Home
Bank of the Pacific works with families from Lynden, Washington, in the north to Salem, Oregon, down south. They know many factors drive home purchases and that, like families, no two are the same. When we’re just starting out, we often look for simple, family-friendly properties in welcoming neighborhoods with sidewalks and parks. As we get a little older, it’s time to either downsize into something manageable during retirement or invest in a multigenerational property everyone can share. Some look for real estate bargains to restore and flip, others for investment properties to provide extra income. Whatever your needs, Bank of the Pacific is happy to help.
Michael Lombardo is Bank of the Pacific’s Director of Residential Lending. Though he’s only been with their team for the past two and a half years, he’s been in the industry for more than three decades. Lombardo has a background in lending, real estate, securitizations, loan portfolio management, and culture change management. This experience and expertise mean your unique journey is in good hands.
Community Banking Builds Trusted Partnerships
Lombardo says that what sets Bank of the Pacific apart in a crowded financial field is their caring, knowledgeable staff and scope of services provided. “We are not transactionally focused,” says Lombardo, “we are community bankers that believe we are building relationships for the long term. Repeat business and referrals are a primary source of business, therefore, we strive to be trusted partners and hire people who believe in that mission.”
Their specialists are always ready to talk you through home purchases, refinancing options, new home construction or home equity loans. You can get started online or call, visit, text or email a team member to begin the process. “We always want to meet people,” says Lombardo, “and the most important thing is that our customers know a real person is working for and with them the entire way.”
Advice from Real Estate Lending Pros at Bank of the Pacific
The past few years have been a housing market whirlwind. Prices and interest rates fluctuate daily, and a shortage of available homes means new listings are snapped up within hours. Lombardo acknowledges that “as much as the government has tried to curb inflation by raising interest rates, it hasn’t had the desired effect on real estate in our markets. Affordability is an ongoing challenge for people seeking home ownership and market volatility and uncertainty forces lenders like us to work to find creative loan programs that help credit-worthy buyers get into a home.”
He advises hopefuls to be prepared, save paystubs and files — ideally as PDF documents for ease of attaching to an email — and plan 12 to 24 months in advance. “Pre-qualifying is the same as applying for a loan,” says Lombardo, “and it can feel overwhelming with lots of paperwork and document requests. Stay organized so you can react quickly when rates begin to decline, set goals for yourself, talk to a mortgage lender and ask a million questions. A good lender will always take the time to help you.”
At Bank of the Pacific, you can begin the application online and one of their home loan specialists will get back to you within 72 hours. Otherwise, find the specialist in a branch location nearest you and reach out directly with questions or to make an in-person appointment.
If you’re new to Bank of the Pacific’s many services, take a moment to investigate their competitive checking and savings accounts, investment options, merchant services for small businesses, commercial lending or real estate and helpful financial calculators.
Home buying is still one of the largest purchases most people ever make. But though it may seem out of reach, don’t be daunted. At Bank of the Pacific, lenders like Lombardo will make sure you’re comfortably prepared well in advance and ready to act when the right property comes along. Because when it does, you can start the next phase of life with a celebratory welcome mat and dreams for the future.
Cecilian Partners, a proptech firm that offers comprehensive digital solutions for home builders and land developers, has successfully raised $11 million in its first institutional equity round led by Resolve Growth Partners. This funding will enable Cecilian to accelerate product innovation, expand its workforce in crucial areas, and further enhance its customer success team.
John Cecilian, Jr., the company’s co-founder and CEO, expressed his excitement and validation upon receiving the term sheet from Resolve Growth Partners:
“This investment transitions us from a ‘scrappy start-up’ to a focused organization positioned to win. We are grateful to the team at Resolve and ready to accomplish meaningful growth and customer expansion.”
Despite a recent decline in early-stage funding, Resolve selected Cecilian Partners after conducting extensive due diligence and evaluating numerous SaaS companies. They were impressed by Cecilian’s impressive revenue growth, proven business model, and a clear path to profitability.
“We’re thrilled to have the opportunity to partner with John and the rest of the team at Cecilian Partners to build the category-leading platform for land developers and home builders,” said Resolve co-founder and Managing Partner Chris Rhodes. “This market has traditionally been underserved by technology. Cecilian offers a first-of-its-kind solution to help its customers transform their businesses through digitization and a true partnership approach.”
Since its establishment in 2019, Cecilian Partners has focused on serving the rapidly growing new homes segment in residential real estate. Their innovative software suite streamlines the land and property development process, consolidating data, automating manual tasks, and providing an enhanced customer experience throughout the homebuying journey.
Cecilian’s revenue tripled in the past year, surpassing the typical growth rate for early-stage SaaS companies. Additionally, their client base expanded by 65%. The company now serves builders and developers across multiple states, boasting over 75 clients in Texas and Florida alone, where nearly one-third of all new homes in the US are constructed.
In addition to securing funding, Cecilian was recognized for its achievements throughout the year. They were included in the HousingWire TECH100 list, honored with a PHL Inno Fire Award, and acknowledged as one of the best places to work in the greater Philadelphia area.
With Resolve’s support, Cecilian will accelerate its pace of product innovation and talent acquisition. They will also benefit from Resolve’s financial expertise and experience in building successful SaaS companies. As part of this strategy, the company’s Board of Directors will undergo restructuring, with Chris Rhodes and Rocco Natalicchio from Resolve joining the board. Stephanie McCarty, Chief Marketing & Communications Officer at Taylor Morrison, and Ned Moore, co-founder and CEO of Clutch, will continue to serve on the board, bringing their expertise in real estate development and SaaS markets, respectively.
Stephanie McCarty expressed her belief that Cecilian Partners is well-positioned to drive innovation in the new home construction industry. She highlighted the company’s expansive suite of products, which can address outdated processes and longstanding challenges, ultimately enhancing the experience for customers, builders, and developers.
With Resolve’s investment, Cecilian will rapidly expand its team by hiring key roles in business development, in-house technology and research, customer success, and marketing. These new hires will help capture growth opportunities, drive innovation, improve client support, and increase brand visibility across the country. Over the next 12-15 months, Cecilian plans to increase its workforce by 50%, with additional staff based in Chicago, Dallas, Raleigh, and their headquarters in New Hope, Pennsylvania.
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Mihaela Lica Butler is senior partner at Pamil Visions PR. She is a widely cited authority on public relations issues, with an experience of over 25 years in online PR, marketing, and SEO.She covers startups, online marketing, social media, SEO, and other topics of interest for Realty Biz News.