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Louisville, like the nation, continues to see rising single-family home prices amid low inventory.
Rising interest rates in 2023 sidelined many potential homebuyers and provided little appetite to potential home sellers sitting on much lower interest rates.
Median home prices rose 3.6% last year in the greater Louisville area over 2022, according to the Greater Louisville Association of Realtors. New listings were down 10% and closed sales were down 15%.
“Brutal,” Mike Frank, a senior mortgage broker at Homestretch Mortgage in Louisville, said of 2023. “That was my worst year in the business last year. That’s because everybody was scared because the market turned so fast and rates were at 8%.”
it was likely done raising interest rates after more than a year of hikes meant to slow inflation. It also signaled three rate cuts could be coming in 2024.
Lowering this rate is expected to lead to lower mortgage rates, which hit a 23-year high in October 2023 at nearly 7.8%.
the typical down payment for first-time (8%) and repeat (19%) buyers, according to the National Association of Realtors), a 30-year mortgage with a 7% interest rate would mean monthly payments of about $1,600 (not including homeowner’s insurance or property taxes). Drop the interest rate to 6% and the payment falls to about $1,440.
“It going to get people off of the fence,” Frank said of potential home buyers. “I don’t think (the rates) are gonna go too much lower, but at least it’s gonna get people to go, ‘Ok, maybe this is the time.'”
Last year marked the worst year on record for home sales in the United States since 1995, according to the National Association of Realtors.
In the greater Louisville area, December 2023 marked the 24th consecutive month of year-over-year declines in existing home sales. Real estate agents compare months year-over-year instead of month-to-month because of seasonal trends in real estate.
Redfin. Nearly 60% have a rate below 4%.
“How do you convince those people that this is a great time to move?” he said.
He anticipates the more rates drop toward the rates that homeowners currently have, the more likely they’ll be to take the rising equity they have in their home and go shopping for a new one.
“If we can close the gap that we have between rates that homeowners got a few years ago versus current market rates, that could help push a few more homes into the market,” he said.
An imbalance of buyers and available homes has made for a persistent seller’s market, a trend local real estate agents don’t see changing any time soon.
Those in the real estate industry consider three to six months of supply (how long it would take for the existing supply of homes on the market to sell at the current sales pace) to be a “balanced” market favorable to both buyers and sellers.
traced back to the Great Recession when many homebuilders went out of business and those that remained didn’t resume building at previous rates.
Even with a projected drop in interest rates, DeWalt said she’s not anticipating the frenzy of the 2020 and 2021 housing market that saw intense bidding wars and the waiving of contingencies, such as home inspections.
“I don’t see it being as crazy like that this coming year, even with more buyers coming on because of the interest rates,” she said. “They’re not gonna drop that low.”
national Realtors association, in a recent news release. “If price increases continue at the current pace, the country could accelerate into haves and have-nots.”
Schuler said he anticipates 2024 will “be a more normal year of what real estate used to be like pre-pandemic,” with its most challenging aspect being expectation management for both buyers and sellers.
“From a home seller standpoint, they’ll need to understand … their property will not sell within three hours,” he said. “All they’ve heard for the past three to four years and all they’ve seen on social media and then the news are homes selling for above asking price, multiple offers, waiving any and every contingency. Whereas now that’s not the case.”
Buyers, meanwhile, may feel buoyed by news of interest rates dropping, but they’re still up against a challenging inventory issue.
“From a home buyer standpoint, they’re still gonna have to understand the fact that inventory levels continue to be historically low,” he said. “So if you have your list of everything you want and need in a home, you’re going to have to be understanding that you probably won’t get all of those items, and chances are you still will be paying 98% of the listing price.”
Even if rates fall, Schuler and Frank encouraged prospective home buyers to analyze their budget and focus on what a potential monthly payment would be.
“We instruct our clients that you live in your payment,” he said. “So try not to just focus so much on the price of the home or the rate. Let’s just look at the monthly payment. Can you comfortably live with this monthly payment? Yes or no?”
Different loan programs have varying parameters that will shape a monthly payment, Frank said, yet another consideration for people as they weigh entering the market.
“We would be naive to think that the rate doesn’t matter because it does,” Frank said. “But there are other factors that really come into play.”
Growth & development reporter Matthew Glowicki can be reached at [email protected], 502-582-4000 or on Twitter @mattglo.
The Federal Reserve left interest rates alone for the fourth consecutive meeting and acknowledged the progress it’s made at defeating red-hot inflation — but stopped short of indicating that rate cuts are around the corner as the economy’s strength continues to surprise.
The Federal Open Market Committee’s (FOMC) decision points to the likelihood that the Fed will not lift its key benchmark borrowing rate any higher than its current target range: 5.25-5.5 percent. That’s still, however, a level that hasn’t been seen since 2001, translating to significant gains on the prices consumers pay to borrow money. Mortgage rates, home equity lines of credit (HELOCs) and auto loans are the highest in more than a decade, Bankrate data shows.
An improving inflation picture is giving policymakers room to slow their fastest rate-hiking regime since the 1980s. The Fed officially targets a 2 percent annual rate, and prices rose 2.6 percent from a year ago as of December, according to their preferred gauge from the Department of Commerce. It marks a major improvement in a historically short period of time. Just last January, prices rose at a 5.5 percent annual rate, while inflation also peaked at 7.1 percent in June 2022.
The slowdown is also more pronounced than Fed officials expected. Last March, officials thought inflation would finish 2023 at a 3.3 percent annual rate, their projections show.
The FOMC “judges that the risks to achieving its employment and inflation goals are moving into better balance,” officials wrote in their post-meeting statement. “The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
But officials aren’t yet ready to declare “mission accomplished” in their inflation fight. Defying theory, higher interest rates and slowing inflation haven’t slammed the brakes on economic growth. In the final two quarters of 2023, the U.S. economy expanded at the fastest pace since 2021. Unemployment has remained at a historically low level below 4 percent for the longest stretch of time since the 1960s, and job openings are still more plentiful than at any point before the pandemic.
It creates a difficult conundrum for U.S. central bankers, who are expected to soon start debating the proper timing for lowering interest rates. Officials don’t just attempt to keep prices stable but also aim to achieve maximum employment in the U.S. economy. Keeping interest rates too high for too long could risk damaging Americans’ job prospects — and the more inflation slows, the more restrictive their rate benchmark becomes.
But haunted by memories of the U.S. central bank pulling back too soon and reigning more inflation in the 1970s, Fed officials don’t want to risk giving the economy more juice that could make its war on inflation more pronounced and painful.
Officials aren’t appearing to be in any rush to cut interest rates. As of December, policymakers were expecting to cut interest rates three times this year. Investors, however, think the slowdown in inflation can pave the way for a much more aggressive series of rate cuts. Investors are currently pricing in six quarter-point, or 1.5 percentage points, worth of cuts for 2024, CME Group’s FedWatch tool shows.
The Fed has a more powerful influence over consumers’ wallets than any other policymaker in Washington. Just as the Fed’s rate acts as a lever on the key interest rates throughout Americans’ financial lives, it also influences how much consumers earn on their savings accounts and certificates of deposit (CDs). The highest yields in over a decade are also slowly starting to pull back, now that it looks like the Fed is done raising interest rates.
“Inflation has come down faster than anticipated, but whether or not this can be sustained is central to the Fed’s decision about when to begin cutting interest rates,” says Greg McBride, CFA, Bankrate chief financial analyst. “The Fed is certainly pushing back on the notion of a March interest rate cut, dashing investors’ hopes again, but keeping options open and remaining non-committal as a central bank does.”
Even if the Fed cuts interest rates this year, the wins for savers aren’t yet over. Barring a major economic catastrophe, Fed officials are unlikely to reverse course and cut borrowing costs back to near-zero. Translation: Rates will stay higher for longer, meaning historic payouts on consumers’ savings accounts are bound to remain.
Don’t be surprised, however, if yields drift lower over the coming months. On many of the products Bankrate tracks, they already have. Last October, the top-yielding 5-year CD hit 4.85 percent annual percentage yield (APY). Today, it’s paying 4.6 percent. Even high-yield savings accounts — offering consumers an APY roughly nine times higher than the national average — have edged lower to 5.35 percent from 5.4 percent.
Consumers who can afford to tie up some of their cash — or retirees who want to add another no-risk, fixed-income investment to their portfolio — aren’t gaining any ground by waiting to lock in a CD. But if you’re primarily saving for emergencies, lower rates shouldn’t deter you from shopping around for an account with the best rate.
Keeping just $1,000 in a high-yield savings account offering 5 percent APY would give you $50 in interest. Stashing away $10,000, meanwhile, can earn a saver an extra $500 in a year.
If you don’t have an emergency fund, it’s an exceptionally costly era to have to turn to credit cards to fund an unexpected expense. Credit card rates have been hovering at the highest levels on record since September, most recently hitting 20.74 percent, Bankrate data shows. They could retreat when the Fed begins to cut interest rates but not enough to make high-cost debt less of a headache. Even when the Fed’s benchmark was at a record low, rates were holding above 16 percent annual percentage rate (APR).
The good news for credit card borrowers: The economy avoiding a recession means issuers are unlikely to pull back on the 0-percent introductory offers on balance transfer cards. If you’re looking to chip away at credit card debt, you can currently find a card that won’t charge you any interest for as long as 21 months, helping your debt repayments go even further. Be sure to calculate the fees associated with transferring that balance to a credit card and have a debt repayment game plan. A $10,000 balance with a 21-month no-interest offer would still require that consumers dedicate about $471 a month to eliminate that debt on time before their interest charges surge again.
Consumers with fixed-rate loans locked in before the Fed began raising interest rates have been protected from the Fed’s rapid rate hikes, but you can’t always time the market. If you’re going to have to finance a big ticket purchase in the near future, be sure to compare offers from multiple lenders before locking in a loan.
To set yourself up for lenders’ best offers, bolster your credit score by paying your bills on time and utilizing less than 30 percent of your available credit.
If you borrowed money after the Fed began raising interest rates and your credit score has improved, you might be able to refinance into a lower, fixed-rate loan.
It’s not as affordable to finance a home as it was in the aftermath of the coronavirus pandemic, but it’s certainly getting cheaper than it was last fall. After surging above 8 percent in October for the first time since 2000, the 30-year fixed-rate mortgage has now fallen more than a percentage point, touching 6.93 percent as of Jan. 24, Bankrate data shows.
The difference might not seem like much, but for buyers simultaneously facing the dilemma of low inventory and high prices, the pullback creates more breathing room in homeowners’ budgets. The drop in mortgage rates since last fall translates to more than $4,000 in savings a year, Bankate’s mortgage calculator shows.
More improvement could be on the horizon. McBride predicts that the 30-year fixed-rate mortgage will fall to 5.75 percent by the end of the year, according to his 2024 interest rate forecast.
Central to housing affordability, however, are low inventory and high prices. Home prices in November snapped a nine-month streak of gains in S&P CoreLogic’s Case-Shiller Home Price Index, suggesting that home price appreciation might be losing some momentum. But housing is still more expensive than it was before the pandemic, with prices up 46 percent since February 2020, S&P CoreLogic’s data also shows.
The housing market has been especially troubling for first-time buyers. The typical age of a first-time buyer hit 35, near the oldest levels on record, according to National Association of Realtors data from November.
If you’re deciding to wait out a difficult market, you can still take steps that set you up for homeownership in the future. Work on growing your income, paying down your debts, bolstering your credit score and saving for a down payment, so you’re better prepared when the time does come.
No one is happier about the prospect of lower rates than investors. The S&P 500 and the Dow Jones Industrial Average have broken six fresh record highs so far in 2024.
But investors’ hopes can be dashed in an instant. The Fed looks unlikely to cut interest rates as aggressively as investors are expecting. Meanwhile, continued good news for the U.S. economy could quickly start to make markets jittery if it threatens the U.S. central bank’s plans to reduce borrowing costs.
The long-term investor, however, shouldn’t pay attention to those fears. Stay the course with your retirement savings, and keep a diversified portfolio. The temporary pain of high rates is meant to provide the long-term gain of slow and stable inflation — a positive for economic growth and company earnings in the long run.
In a pointed admission, Fed Chair Jerome Powell said discussions at the Fed’s latest rate-setting meeting lead him to believe that it’s unlikely the Fed will cut interest rates at its next meeting in March — though whether that proves reality “remains to be seen,” he said.
Officials aren’t so worried about inflation accelerating, though they’d be prepared to raise borrowing costs again if it did, Powell said. Rather, the greater risk is that inflation stays stuck in a holding pattern above 2 percent.
Between now and the March meeting, the Fed will have two more inflation and jobs reports from the Bureau of Labor Statistics, as well as another look at its preferred gauge from the Commerce Department.
“It’s not that we’re looking for better data, but a continuation of the good data we’ve been seeing,” Powell said at the post-meeting press conference, referring to what the Fed would need to see to feel confident enough about cutting rates. You’ve had six good months, very good months, but what’s really going to shake out here when we look back?”
Rate cuts, however, haven’t been taken off the table. Powell said that “almost” all officials think slowing inflation will clear the path for them to cut borrowing costs sometime this year.
Investors are now starting to turn to the May or June meetings as the timing for the Fed’s first rate cut, CME Group’s data shows. A month ago, investors said the odds of rate cuts beginning in March were nearly 73 percent.
One takeaway that investors appreciated: Powell said the Fed doesn’t view a resilient economy as a problem, so long as inflation continues simultaneously cooling. Powell has previously indicated that officials believe they need to see “below-trend growth” to bring inflation down. His new comments suggest the Fed would still be willing to cut rates in a strong economy — different from previous cycles, when the Fed has aggressively slashed borrowing costs to save the economy from a recession.
Stocks soared to their highest of the trading day on the statement, though they quickly erased those gains once Powell took a March cut off the table.
“We want to see strong growth; we want to see a strong labor market,” Powell said. “We’re not looking for a weaker labor market. We’re looking for inflation to continue coming down, as it has been over the past six months.”
But the job isn’t over. Healing supply chains aren’t fueling disinflation as much as they once were — and the next mile of bringing inflation back down might rest within the labor market. A fresh look at companies’ compensation costs showed that wages rose 4.3 percent from a year ago in the fourth quarter of 2023, a major slowdown from the 5.7 percent rate in the second quarter of 2022 but more robust than at any point before the pandemic. The data signals that employers’ demands for workers are still outstripping supply, and elevated wage gains could put more pressure on the stickier side of inflation: services.
Helping to prevent the booming job market from contributing to more inflation last year, 2.8 million workers entered the labor force in 2023, Labor Department data shows. An aging population calls into question just how much longer those gains can last. A separate report from the Congressional Budget Office released on Jan. 18 showed that forecasters in Washington project the population will grow just 0.6 percent a year on average between 2024 and 2034.
The Fed has risks on both sides. Just as cutting rates too soon could spur more inflation, the Fed could also put its soft landing in jeopardy if it ends up leaving borrowing costs too high for too long.
“This is transitory disinflation,” says Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management, harkening back to the phrase that Fed officials initially used to describe the post-pandemic price burst. “How do you land an economy that is as big as ours, at exactly the point where supply and demand meet? They always desire a soft landing. It’s just hard to achieve one.”
A strong U.S. economy will be a boon for the housing market, Mortgage Bankers Association’s (MBA) chief economist said on Thursday, as it will buoy demand and as inflation continues to fall, mortgage rates will decline as well making home loans more affordable for buyers.
The U.S. economy accelerated at a faster-than-expected clip in the fourth quarter of 2023 at 3.3 percent, the Commerce Department’s Bureau of Economic Analysis revealed on Thursday.
Meanwhile, the personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred measurement of inflation’s progress—jumped by 1.7 percent during the quarter. Core PCE, which excludes the often volatile food and energy prices, increased by 2 percent.
These dynamics bode well for the housing market that has been struggling under the weight of record-high mortgage rates, sparked in part by the Fed’s hiking of rate at the most aggressive clip since the 1980s to fight soaring inflation.
The Fed’s funds rate currently sits at 5.25 to 5.5 percent—the highest they have been in two decades—and policymakers have signaled that they will slash rates should inflation come down to their 2 percent target.
But an economy that may avoid a recession as inflation moderates without the Fed’s tight monetary policy doing too much damage to the jobs market would help the housing sector.
“Stronger economic growth will benefit the housing market, keeping demand robust,” Mike Fratantoni, MBA’s chief economist, said in a statement shared with Newsweek. “Moreover, today’s report also showed further reductions in inflation, which will enable the Federal Reserve to cut rates later this year—as they have been hinting.”
Mortgage rates ticked up slightly for the week ending January 25, Freddie Mac said on Thursday, with the 30-year fixed rate averaging 6.69 percent.
“The 30-year fixed-rate has remained within a very narrow range over the last month, settling in at 6.69% this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rates look to have stabilized, Khater suggested, encouraging buyers to jump off the fence.
“Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace,” he said.
A slowdown in rates could have a negative impact on home buyers, some analysts say.
A decline in the cost of home loans would encourage more purchases, and this increase in demand will spark competition at a time when there is a limited supply of homes for sale.
More buyers who can afford mortgages entering the market will push up prices, analysts from Goldman Sachs said this week.
The investment bank’s experts project prices to soar by 5 percent in 2024, a marked revision from their earlier expectation of a 2 percent jump. That trend will continue through next year when prices are forecast to increase by nearly 4 percent, which is also a change from a previously estimated increase of close to 3 percent.
Amid the price increases, Goldman Sachs analysts anticipate that rates will fall to 6.63 percent for the year. This drop in rates from the near 8 percent highs of November 2023, will make house loans more affordable, sparking more demand for properties.
“We have very low inventory of houses for sale, which is generally supportive of prices, along with generally stable demand that is coming from things like household formation,” Roger Ashworth, senior strategist on the structured credit team at Goldman Sachs, said this week.
On Thursday, new home sales climbed up by 8 percent in December, according to government data, while prices declined to two-year lows. The fall in prices and a rise in sales was partly due to builders offering inducements to buyers, according to Yelena Maleyev, a senior economist at KPMG.
“Builders have pivoted to building smaller homes and offering more discounts and concessions, such as mortgage rate buydowns, to bring in buyers sidelined by rising mortgage rates,” she said in a note shared with Newsweek.
But the data from the U.S. Census Bureau also showed that inventory of newly built homes fell last month after going up the previous months. There were 453,000 houses available for sale at the end of December, which accounts for 8.2 months’ worth of supply.
This constituted a 3.5 percent decline from the same time a year ago, Maleyev pointed out.
The lack of inventory also comes at a time when the used homes market has struggled. Sales are down in that segment amid a lack of supply of homes as sellers are reluctant to give up their low rates for new home loans hovering in the mid-6 percent.
This lack of supply will be key to how prices shake out and the outlook for the year is not encouraging.
“If mortgage rates fall below 6 [percent] in 2024, more owners will feel comfortable listing their homes for sale, alleviating some of the shortages, but not enough to close the supply gap,” Maleyev said.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Buying a home has been a struggle for many people in recent months. A big reason boils down to the combination of expensive rates for mortgage loans, elevated home prices, and low inventory.
Of course, these factors all go hand in hand. With mortgage lenders imposing higher rates on borrowers, current homeowners don’t want to move. Doing so, for many people, will mean giving up a lower mortgage rate and swapping it for a higher one.
But because people don’t want to give up their mortgage rates, housing inventory isn’t increasing. And because the demand for homes still exceeds the available supply, housing prices have risen.
In November, the National Association of Realtors (NAR) reported that there was a 3.5-month supply of available homes on the market. But is the inventory situation getting better? Unfortunately, that does not seem to be the case.
The NAR says that housing inventory fell 1.7% in November compared to October. That’s not a good thing when buyers are so desperate to see the opposite happen.
Now, to give November’s 3.5-month supply of homes some context, it can easily take a six-month supply of homes to meet buyer demand in full. So November’s supply represents a notable gap. Unfortunately, until mortgage rates come down to a more moderate level, real estate inventory is likely to remain stagnant.
More: Check out our picks for the best mortgage lenders
Many homeowners locked in sub-3% mortgages in 2020 and 2021. It’s hard to make the case to swap a rate like that for a rate that’s above 6.5%, which is what the typical 30-year mortgage costs today.
If you’re trying to buy a home, you may get tripped up by today’s low inventory. And inventory may not pick up for a while. So you may have to work with what you have.
One thing you should do is make a list of your top deal-breakers — but limit it to just a few things. You may, for example, say that you absolutely will not buy a home with less than three bedrooms. Similarly, you might say that two full bathrooms is the minimum number you’ll accept.
That’s totally fine. But try not to impose too many top deal-breakers, because in a market that lacks inventory, that could mean never finding a home that meets your needs. Instead, put those less-important items on your “less important” list.
For example, you may really want a home with a finished basement. But it could pay to designate that as a less important item. If you find a home with an unfinished basement, you can finish it as time and money allow. On the other hand, it may not be possible to add another full bathroom to an existing home without doing a major overhaul that involves running new plumbing and ventilation. To put it another way, finishing a basement might be a much less exhausting and expensive project.
We may not see real estate inventory pick up for quite some time. So as a buyer, your best bet may be to identify your top deal-breakers, but loosen up on other requirements.
Both the cost of rent and U.S. home prices soared during the pandemic. After historically high home prices and rising mortgage interest rates in 2023, the rent vs. buy calculator now favors renters for the first time in decades. But just barely.
Paying a mortgage builds home equity. That’s the difference between the current value of the home and the amount of money paid in, minus any liens on the property. When a homebuyer sells, they pocket any surplus, after expenses. For years, home ownership has been a way to build individual and generational wealth.
Paying rent doesn’t build equity. But that doesn’t mean it’s a waste of money, despite what some financial gurus might try to tell you. Home prices are high and the availability of affordable properties hit an all-time low in 2023. So renting is a smarter financial decision for many U.S. residents right now.
Personal finances and the national housing market aren’t the only things to consider. The rent vs. buy calculator includes many variables. They vary from person to person and year to year.
Age, lifestyle, career outlook and financial risk tolerance matter. Where you want to live both factor into the decision. Take a look at Redfin’s rent vs. buy calculator to evaluate which option makes more sense for you.
Many renters will benefit from extending their lease into 2024. Here are six reasons why renting is a good choice right now.
Redfin reports that buying a home costs 25 percent more than renting in 2023. In fact, last year was the most expensive year for home prices in Redfin’s records. A buyer making the country’s median wage would need to pay 41.4 percent of their income for a home. That’s well above the 30 percent recommended by experts.
Record high home prices were only part of the issue. High interest rates and low inventory kept home prices elevated through the end of 2023
In contrast, nationwide rent prices actually fell late last year. According to the December Rent Report, rent prices dropped .57 percent month-over-month. Rates were also down 2.09 percent from December 2022.
In cities, the price difference between buying and renting is even steeper. It was more expensive to buy a home than to rent one in all but four major metropolitan areas in May 2023.
Purchasing a home is a major financial investment. Buyers typically need a 20 percent down payment to secure a mortgage. When housing stock is low, they may also need to offer more than the asking price. They might also need to compete in bidding wars or be able to pay a percentage in cash to secure the house they want.
Renting is more cost-effective for many. A typical apartment lease includes a security deposit. Rents get this security deposit back when they move out if there’s no damage, outstanding fees or rent owed. Fees for parking spaces or having pets in the apartment added. A rent calculator can help determine your budget.
It’s usually cheaper month to month as well. Business Insider reports that U.S. homeowners pay a median of $2,690 each year in property taxes. Property taxes, mortgage interest and home repair costs are tax deductible. But these costs add up.
Renter’s insurance is almost always cheaper than homeowner’s insurance. NerdWallet states that the average price for renter’s insurance in the United States is $148 a year. That breaks down to just $12 per month. The same outlet reports that homeowner’s insurance typically costs $1,820 a year. Rates vary state to state.
A lease may also include some (or all) utilities. This means fewer bills to pay and a more predictable household budget.
A homeowner has to pay for emergency expenses like a broken water heater or a new roof out of their own pocket. They also have to file their own insurance claims. Then they need to make any necessary repairs – or hire professionals to do so. But renters can pass these responsibilities on to their landlord or property manager.
In addition, renters don’t need to stress about lawn care, landscaping, or snow removal either. That saves a lot of time, stress, and money over the course of a lease.
As a bonus, many rentals offer communal amenities. These can include workspaces and lobbies, rooftop patios and grills, pools and playgrounds. Residents can also enjoy perks like gyms, dog wash stations or bike storage. Residents get all the benefits without membership fees or maintenance.
Building home equity is an investment with higher upfront costs. So experts recommend that residents stay in their home for at least five years to break even. But high housing costs and high interest rates mean that reaching the break-even point may take even longer.
To recoup their investment, homeowners need to commit to staying in one place for years. Homes usually appreciate in value, but there’s no guarantee homeowners will turn a profit..
Renting is best for people who need flexibility. Applying for a mortgage requires a stable job and regular and predictable paychecks.
People planning a major career change may be better off renting for now. The same goes for people facing job insecurity. Going back to school, retirement or caregiving can also influence income. A renter can re-evaluate before signing a year-long lease. Homeowners are tied to a 15- or 30-year mortgage.
Renting is a great way to explore different neighborhoods, home types and amenities. Location is the one thing about a home that buyers can’t change. So it’s smart to rent in a neighborhood before committing to a mortgage. Or you could experiment with the best of both worlds with a rent-to-own home.
Renting can also allow residents to experience different house types. They can experience living in apartments, townhomes, duplexes and single-family homes).
Renting is a smart option for many. But there are certain instances when the rent or buy calculator favors purchasing a home instead.
Housing experts say that the number of homes available will increase in 2024. More housing stock means home prices could tick downward. That’s a plus for buyers.
Lawrence Yun, National Association of Realtors (NAR) chief economist, predicts that 1.48 million new housing projects will begin in 2024. That number includes 1.04 million single-family units.
Mortgage interest rates have been holding steady for the last several weeks. Rates hovered around the 7 percent mark for 30-year fixed rate mortgages and just over 6 percent for 15-year fixed rate mortgages. That’s down from last year’s high.
“Many of the factors that made 2023 the least affordable year for homebuying on record are easing,” said Redfin Senior Economist Elijah de la Campa. “Mortgage rates are under 7 percent for the first time in months, home price growth is slowing as lower rates prompt more people to list their homes, and overall inflation continues to cool. We’ll likely see a jump in home purchases in the new year as buyers take advantage of lower mortgage rates and more listings after the holidays.”
But it’s important to note that these available properties are at the high end of the market. Affordable housing numbers remain historically low.
More housing stock and lower interest rates will help push home prices lower. Housing experts predict certain markets will rebound first.
“Metro markets in southern states will likely outperform others due to faster job increases,” says Yun, NAR chief economist. “While markets in the Midwest will experience gains from being in the most affordable region.”
Choosing whether to rent or buy is a personal decision that depends on many factors. For many U.S. residents, renting is a more affordable and flexible option right now, but investing in a home is never a bad idea.
Check out houses and apartments for rent.
Looking to buy? See homes for sale here.
For most of 2023, the housing market was stuck in neutral. Rising mortgage rates weighed on both supply and demand, causing home sales to plummet.
And for a while, it seemed like mortgage rates could climb indefinitely. But mortgage rates started to reverse course in November, and suddenly, the outlook for the 2024 housing market was striking a more positive tone.
While lower mortgage rates won’t entirely crack the ceiling of what’s still a historically unaffordable housing market, 2024 is expected to be more balanced, with the potential for higher inventory and slightly lower home prices, according to Fran Lisner, real estate agent with Daniel Gale Sotheby’s. “The best news is for buyers who will see more options to choose from, increased negotiating power and reduced time pressure,” Lisner said.
As we kick off the year, prospective homebuyers are wondering what’s in store for them. We talked to several experts about their housing market predictions and top tips for today’s homebuyers. Here’s what they had to say.
Read more: Mortgage Predictions: Could 2024 Be a Better Year for Homebuyers?
While experts are cautiously optimistic about the direction of the housing market in 2024, buying a home (especially if it’s your first time) is rarely a pain-free process. From tracking market conditions to the actual process of getting a mortgage, there are a lot of moving parts.
Housing market trends are dynamic and, oftentimes, hard to understand, especially when it comes to all the factors that affect mortgage rates (the list is longer than you think).
That’s why housing market experts and economists are constantly tracking economic data to better understand where things are headed. Keeping an eye on what those experts are saying, whether by reading newsletters or listening to podcasts, can help you become a more informed buyer without getting too deep into the macroeconomic weeds.
Here are some of the podcasts I listen to that help me stay in the loop.
In 2023, mortgage rates kept climbing until they passed 8% in early fall. But soon after, rates started to trend down for the first time in months. As inflation slows and the Federal Reserve initiates interest rate cuts, experts predict mortgage rates will eventually reach 6% by the end of 2024.
“Rates are down over 1% since peaking in October, and with the Fed done with their rate hikes, we expect rates to keep falling for the next few months at least,” said Greg Heym, chief economist at Brown Harris Stevens.
But mortgage interest rates are volatile, making them difficult to predict. And while tracking mortgage rate movement isn’t the most exciting thing to do, there’s a reason experts recommend it: It can save you a lot of money and free up some room in your homebuying budget.
Your interest rate doesn’t only affect your monthly mortgage payments. It also affects the total interest you’ll pay over the course of your loan. Securing a lower rate from the beginning, even if by a few tenths of a percentage point, can save you tens of thousands of dollars over time.
Read more: Compare Current Mortgage Rates
If you haven’t already, start budgeting for your down payment and other costs associated with a home purchase, like closing costs.
The minimum down payment required by most lenders is 3% for conventional loans. But experts often recommend making a down payment closer to 20% of the property’s asking price. That way, you can take out a smaller loan and avoid having to pay private mortgage insurance.
Many lenders will approve you for a loan larger than what you need or can comfortably afford. But that means taking on more debt. “Shift from asking, ‘How much could I borrow?’ to ‘How much should I borrow?’” said Matt Vernon, head of consumer lending at Bank of America.
When creating a budget, you want to make sure you can cover your future monthly mortgage payments as well as any other debt you have, like student loans or credit card debt. At CNET, we recommend the 28/36 rule: Allocate no more than 28% of your pre-tax monthly income toward housing-related expenses and keep your total monthly household debt below 36% of your gross income.
CNET’s mortgage calculator can give you a good idea of what your future mortgage payments might look like based on a few specifics, like your credit score, projected down payment and interest rate.
Read more: How Much House Can I Afford?
Between 2020 and 2022, home prices saw double-digit growth. In 2023, the pace of growth slowed but prices were still up around 3% on an annual basis. Forecasts from Redfin and Realtor.com show home prices easing in the second half of 2024, but not dramatically — between 1% and 1.7%.
“I don’t predict many bargains out there because you don’t go from zero inventory to an overflow of available homes on the market, which is when you would see a substantial price drop,” said Dottie Herman, vice-chair at Douglas Elliman Real Estate. That means we won’t see any major home price declines in 2024, according to Herman.
But what real estate is doing on a national level might not reflect what’s happening in your neck of the woods. Home prices and housing supply vary by city and state, so it’s always worth looking at less expensive markets. In markets where inventory is especially tight, like New York, prices are expected to increase by 3% in 2024. Meanwhile, prices in the Austin, Texas, metro area are projected to fall by around 12%.
Many prospective buyers are sitting on the sidelines as they wait for mortgage rates to fall and affordability to improve. As mortgage rates inch lower over the course of 2024, experts expect that pent-up homebuying demand will lead to increased competition.
“If 2024 becomes a turnaround year for housing, my suggestion would be to get all of your financing straightened out and in shape, and then start looking right away before the weather changes and you are joined by competition,” said Herman. “That’s when bidding wars start, so you want to be ahead of them.”
Buying sooner rather than later, if you have the option, could grant you more negotiating power while the pace of home sales is still slow, according to Afifa Saburi, capital markets analyst at Veterans United Home Loans.
Limited housing inventory is directly related to the lack of home sales: Because the majority of current homeowners have mortgage rates below 5%, they haven’t been eager to list their homes and give up their bargain interest rates for today’s higher rates.
While experts are split on how much the inventory of existing homes will increase in 2024, there is a silver lining: New construction. “Single-family construction has offered relief from scarce existing inventory conditions over the last year,” said Hannah Jones, senior economic research analyst at Realtor.com.
If supply is limited in your area, consider what new-home construction is (or will be) available this year. Buying a newly constructed home comes with a few benefits. For starters, a new home will be move-in ready and likely more energy-efficient than an older home.
Brand-new homes can often be more affordable. As a way to incentivize buyers, many home builders have been offering discounts and rate-buydowns — when you (or a seller) pay money upfront to a lender in exchange for a lower interest rate. Experts say those incentives will continue into 2024.
The right real estate agent can make a big difference in your homebuying journey. You want someone with good communication skills, connections and experience, but the most important thing is an agent with in-depth knowledge of your market who can help you develop the right approach, said Joseph Castillo of Compass Real Estate.
An agent familiar with your area can tell you how realistic your budget is or even point you to more affordable neighboring areas. Start by contacting several local real estate agents to discuss your needs and concerns before settling on one.
If cost continues to be a barrier, see if you qualify for government-backed loans or down payment assistance programs.
“While increased demand is pushing up home prices, there are loan options and grant programs for those who may be able to afford monthly mortgage payments but struggle with the upfront costs,” said Vernon.
FHA loans, VA loans and USDA loans tend to offer lower credit score and down payment requirements than conventional loans. States also provide different types of housing assistance, either through grants or interest-free loans. Check with your state or local housing authority, real estate agent or lender to find out what you may qualify for.
Read more: These 8 First-Time Homebuyer Programs Can Save You Money on Your Mortgage
No matter what’s happening in the market, one step you should never skip is shopping around for mortgage lenders. Researching and comparing offers from multiple lenders will help you find someone aligned with your financial picture and save you a lot of money on your mortgage.
Mortgage interest rates and fees vary widely across lenders. That’s why experts recommend getting at least three loan estimate forms from different lenders to compare the cost of borrowing and potentially negotiate a lower mortgage rate or better loan terms.
If 2024 isn’t your year to buy a home, that’s OK. You can do plenty of things while you wait to put yourself in a better position when you’re ready to buy.
Improve your credit score. Your credit score is one of the main factors lenders consider when determining whether you qualify for a mortgage and at what interest rate. The minimum credit score for conventional loans is 620, but to qualify for the lowest rates, you’ll want to aim for closer to 740. Paying your credit cards on time (ideally, in full) and staying below your credit limit are great places to start.
Pay down debt. Lenders also take into account your debt-to-income ratio, or DTI. Paying down debt will lower your DTI, which means you’ll be able to borrow more — and at a better rate. As an added (and significant) bonus, it will also relieve a major financial burden and give you more room to save for long-term goals, like your down payment.
Save for a down payment. It can take a long time to save up enough cash for a down payment, but you can start small with weekly or monthly savings goals. Consider stowing your cash in a high-yield savings account or certificate of deposit (if you don’t plan to buy in the immediate future) to take advantage of compounding interest.
Experts are optimistic that a combination of falling mortgage rates and slightly lower home prices will give homebuyers more options than last year. But a variety of other issues — like low inventory — are weighing on affordability. Ideally, the affordability crisis will ease and the housing market will stabilize, but that is unlikely to happen in just one year. Though 2024 might not seem like the best year to buy a house, the perfect time should be determined by your financial circumstances and long-term goals.
“Buyers often ask me if it’s the right time to make a purchase. It is, but only if you’re prepared,” said Castillo.
I bought my first rental property in 2010 and I admit it was much easier to buy rentals that cash flowed back. At least it was easier in my area in Northern Colorado. A lot of people wish they could go back in time to buy investment properties (me included) but no one has invented a time machine yet. Wishing for the impossible will do you no good. Since we have to live in reality can you still make money in today’s market with rental properties?
It is harder to invest in real estate in 2024 due to multiple factors.
It is important to know that even though these things make it harder for real estate investors trying to buy now, rising prices have made many existing real estate investors very rich. Landlords also help the housing market, they do not hurt it.
I hope I did not scare everyone off with the doom and gloom of the last section of this article. However, there are still ways to make money with real estate in today’s market. How do you make money with rentals?
It may be tougher to invest in real estate now than ten years ago but it is still definitely possible to make money with rental properties.
It might not work to buy a single-family house in Denver or Seattle or Miami as a rental anymore if you want it to cash flow. While it might not work in every city there are still many areas where you can make money with single-family homes. There are also different strategies you can use to make money with real estate.
While it is not easy to invest in real estate right now, it is rarely easy. Even when I bought my first rental properties many people (including those in the industry and in my family) told me I was an idiot. They told me the market would keep crashing and real estate would never come back. It was also tougher to get loans back then and there were not nearly as many educational sources about real estate either. I learned most of my strategies from reading books, some that were decades old that I hoped would still hold true when I was investing.
There is no perfect time to invest. The only way to know when the timing is perfect is years or decades after that time occurred. Waiting rarely works out but luckily there are many ways to invest in real estate even if rentals won’t work for you in your market right now. If you want to learn more about investing in other markets I put together a very detailed webinar on the subject you can watch below.
Build a Rental Property Empire
Mortgage interest rates inched up this week, following nine straight declines totaling a decrease of 118 basis points (1.18%).
The average 30-year fixed rate mortgage (FRM) rose from 6.61% on Dec. 28 to 6.62% on Jan. 4, according to Freddie Mac.
“Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds,” said Sam Khater, Freddie Mac’s Chief Economist.
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Mortgage rates fluctuated significantly in 2023, with the average 30-year fixed rate going as low as 6.09% on Feb. 2 and as high as 7.79% on Oct. 26, according to Freddie Mac.
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The range can be largely attributed to the Federal Reserve’s ongoing fight against inflation, juxtaposed with uncertainty in the banking sector sparked by Silicon Valley Bank’s collapse. However, with duress permeating the financial market and the fallout from U.S. debt ceiling talks, the Fed may continue making hikes to bring interest rates down.
With the economy likely heading into a recession, it’s possible we’ve already seen the peak of this rate cycle. Of course, interest rates are notoriously volatile and could tick back up on any given week.
Experts from CoreLogic, Home Qualified, Realtor.com and others weigh in on whether 30-year mortgage rates will climb, fall, or level off in January.
Craig Berry, branch manager at Acopia Home Loans
Prediction: Rates will moderate
“As inflation is the no. 1 item on the Federal Reserve’s radar right now, the Feds may choose not to lower the federal funds rate until inflation comes down. And, while Fed rate cuts aren’t a must-have in order for mortgage rates to come down, interest rates are affected by the federal funds rate.
The Feds continue to seek a balance between inflation and maximum employment so as not to cause significant damage to the economy which could trigger a recession. Recent momentum has been positive, and as long inflation cooperates, mortgage rates may see a slight decline in January. However, it isn’t likely that we’ll see significant drops to longer-term rates until we get further into 2024.”
Ralph DiBugnara, president at Home Qualified
Prediction: Rates will fall
“Rates finally shifted down some in December and stabilized lower. U.S. payrolls came in lower than anticipated, unemployment was up and building of new homes was down. These are good signs that inflation may have reached its peak and could trigger a lowering of rates. I expect the Fed to stay neutral for the time being and possibly through the first quarter of the year with possible cuts coming only if we see a drastic shift in the economy. For January, I believe the average 30-year fixed will land at 7.125% and the 15-year fixed will be 6.75%.”
Selma Hepp, chief economist at CoreLogic
Prediction: Rates will fall
“Mortgage rates should continue to decline, albeit very gradually and given there are no surprises with inflation. We should see rates fall below 7% mark.”
Hannah Jones, senior economic research analyst at Realtor.com
Prediction: Rates will fall
“If inflation and employment data continue to show signs of slowing, mortgage rates are likely to ease in January, though at a slower clip than in recent weeks. As incoming data confirms that the economy is indeed cooling, the upward pressure on mortgage rates will continue to let up and buyers will enjoy lower rates than in recent months.
However, if inflation or employment data come in stronger than expected, we could see rates pick up steam once again. Investors expect the Fed to hold steady at the current target rate in next week’s meeting, which would signal the Committee’s confidence in the current policy stance to bring inflation down to the target 2%. As inflation reaches the target level, mortgage rates will continue to drift lower.”
Jess Kennedy, COO at Beeline
Prediction: Rates will fall
“We expect rates to continue to ease as we kick off 2024. You can see the signaling of a rate cut from the Fed in many ways. For example, it is harder to find long-term CDs at the higher interest rates we were seeing 45-60 days ago). Publicly traded companies are also seeing their stock prices move higher on the expectation of rate relief in 2024. All these signs signal rates start to tick down even ahead of an official rate cut.”
Odeta Kushi, deputy chief economist at First American
Prediction: Rates will fall
“In light of favorable trends in inflation and labor market data, the Federal Reserve appears to be on a path towards its goals, although achieving its 2% inflation target will take some time. Consequently, the Fed is expected to maintain a restrictive stance, which will keep mortgage rates elevated. However, given slowing inflation and a cooling labor market, and barring any unforeseen developments, modest reductions in mortgage rates are possible in January.”
Rick Sharga, CEO at CJ Patrick Company
Prediction: Rates will fall
“With inflation moving in the right direction, wage growth slowing, and the jobs market softening a bit, it seems likely that the Federal Reserve has finished rate hikes for this cycle. That, coupled with weakening bond yields, should create an environment where mortgage rates can start a gradual, but steady decline throughout 2024. January rates for 30-year fixed-rate loans will probably straddle 7% — ranging from 7.1% to about 6.9% as the market finds its footing to begin the year.”
As inflation ran rampant in 2022, the Federal Reserve took action to bring it down and that led to the average 30-year fixed-rate mortgage spiking in 2023.
Find your lowest mortgage rate. Start here
With inflation gradually cooling, the Fed adjusted its policies with smaller and skipped hikes. Additionally, the economy showing signs of slowing has many experts believing mortgage interest rates will gradually descend in 2024.
Of course, rates could rise on any given week or if another global event causes widespread uncertainty in the economy.
The 30-year fixed-rate mortgage averaged 6.62%% as of Jan. 4, according to Freddie Mac. All five major housing authorities we looked at project 2024’s first quarter average to finish above that.
The National Association of Home Builders sits at the low end of the group, predicting the average 30-year fixed interest rate to settle at 7.04% for Q1. Meanwhile, Fannie Mae had the highest forecast of 7.6%.
|30-Year Mortgage Rate Forecast (Q1 2024)
|National Association of Home Builders
|Mortgage Bankers Association
|National Association of Realtors
Mortgage rates came down for the ninth consecutive week.
The average 30-year fixed rate increased from 6.61% on Dec. 28 to 6.62% on Jan. 4 The average 15-year fixed mortgage rate fell, going from 5.93% to 5.89%.
Get started shopping for mortgage rates
|Average 30-Year Fixed Rate
Source: Freddie Mac
After hitting record-low territory in 2020 and 2021, mortgage rates climbed to a 23-year high in 2023. Many experts and industry authorities believe they will follow a downward trajectory into 2024. Whatever happens, interest rates are still below historical averages.
Dating back to April 1971, the fixed 30-year interest rate averaged around 7.8%, according to Freddie Mac. So if you haven’t locked a rate yet, don’t lose too much sleep over it. You can still get a good deal, historically speaking — especially if you’re a borrower with strong credit.
Just make sure you shop around to find the best lender and lowest rate for your unique situation.
Many mortgage shoppers don’t realize there are different types of rates in today’s mortgage market. But this knowledge can help home buyers and refinancing households find the best value for their situation.
Find your lowest mortgage rate. Start here
The best mortgage for you depends on your financial situation and your goals.
For instance, if you want to buy a high-priced home and you have great credit, a jumbo loan is your best bet. Jumbo mortgages allow loan amounts above conforming loan limits, which max out at $ in most parts of the U.S.
On the other hand, if you’re a veteran or service member, a VA loan is almost always the right choice. VA loans are backed by the U.S. Department of Veterans Affairs. They provide ultra-low rates and never charge private mortgage insurance (PMI). But you need an eligible service history to qualify.
Conforming loans and FHA loans (those backed by the Federal Housing Administration) are great low-down-payment options.
Conforming loans allow as little as 3% down with FICO scores starting at 620. FHA loans are even more lenient about credit; home buyers can often qualify with a score of 580 or higher, and a less-than-perfect credit history might not disqualify you.
Finally, consider a USDA loan if you want to buy or refinance real estate in a rural area. USDA loans have below-market rates — similar to VA — and reduced mortgage insurance costs. The catch? You need to live in a ‘rural’ area and have moderate or low income to be USDA-eligible.
Mortgage rates displayed their famous volatility in 2023. Uncertainty in the banking sector led to downtrends, but ongoing inflation battles, Fed hikes and a hot job market drove growth.
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At its September and November meetings, the central bank held off on a rate hike, preferring to see if the economy would keep cooling organically. In December, the FOMC skipped a hike and projected cuts for 2024. As always, the committee said it would adjust its policies as necessary — which could mean additional hikes or possibly none at all.
Here are just a few strategies to keep in mind if you’re mortgage shopping in the coming months.
Indecision can lead to failure or missed opportunities. That holds true in home buying as well.
Although the housing market is becoming more balanced than the recent past, it still favors sellers. Prospective borrowers should take the lessons learned from the last few years and apply them now even though conditions are less extreme.
“Taking too long to decide to make an offer can lead to paying more for the home at best and at worst to losing out on it entirely. Buyers should get pre-approved (not pre-qualified) for their mortgage, so that the seller has some certainty about the deal closing. And be ready to close quickly — a long escrow period will put you at a disadvantage.
And it’s definitely not a bad idea to work with a real estate agent who has access to “coming soon” properties, which can give a buyer a little bit of a head start competing for the limited number of homes available,” said Rick Sharga.
Buyer demand is lower than a typical year, but the market usually heats up in spring and summer. Being decisive (and prepared) should only play to your advantage.
Since interest rates can vary drastically from day to day and from lender to lender, failing to shop around likely leads to money lost.
Lenders charge different rates for different levels of credit scores. And while there are ways to negotiate a lower mortgage rate, the easiest is to get multiple quotes from multiple lenders and leverage them against each other.
“For potential home buyers, it’s important to get quotes from multiple lenders for a mortgage, as rates can vary dramatically, especially during such a volatile period,” said Odeta Kushi.
As the mortgage market slows due to lessened demand, lenders will be more eager for business. While missing out on the rock-bottom rates of 2020 and 2021 may sting, there’s always a way to use the market to your advantage.
Rate shopping doesn’t just mean looking at the lowest rates advertised online because those aren’t available to everyone. Typically, those are offered to borrowers with great credit who can put a down payment of 20% or more.
The rate lenders actually offer depends on:
To figure out what rate a lender can offer you based on those factors, you have to fill out a loan application. Lenders will check your credit and verify your income and debts, then give you a ‘real’ rate quote based on your financial situation.
You should get three to five of these quotes at a minimum, then compare them to find the best offer. Look for the lowest rate, but also pay attention to your annual percentage rate (APR), estimated closing costs, and ‘discount points’ — extra fees charged upfront to lower your rate.
This might sound like a lot of work. But you can shop for mortgage rates in under a day if you put your mind to it. And shaving just a few basis points off your rate can save you thousands.
Compare mortgage and refinance rates. Start here
Current mortgage rates are averaging 6.62% for a 30-year fixed-rate loan and 5.89% for a 15-year fixed-rate loan, according to Freddie Mac’s latest weekly rate survey. Your individual rate could be higher or lower than the average depending on your credit score, down payment, and the lender you choose to work with, among other factors.
Mortgage rates could decrease next week (Jan. 8-12, 2024) if the mortgage market takes a cautious approach to a possible recession. However, rates could rise if lenders account for the Federal Reserve taking measures to counteract inflation or if a global event brings economic uncertainty.
If inflation continues to dissipate and the economy cools or goes into a recession, it’s likely mortgage rates will decrease in 2024. Although, it’s important to remember that interest rates are notoriously volatile and are driven by many factors, so they can rise during any given week.
Mortgage rates may continue to rise in 2024. High inflation, a strong housing market, and policy changes by the Federal Reserve have all pushed rates higher in 2022 and 2023. However, if the U.S. does indeed enter a recession, mortgage rates could come down.
Freddie Mac is now citing average 30-year rates in the 7% range. If you can find a rate in the 5s or 6s, you’re in a very good position. Remember that rates vary a lot by borrower. Those with perfect credit and large down payments may get below-average interest rates, while poor-credit borrowers and those with non-QM loans could see much higher rates. You’ll need to get pre-approved for a mortgage to know your exact rate.
For the most part, industry experts do not expect the housing market to crash in 2023. Yes, home prices are over-inflated. But many of the risk factors that led to the 2008 crash are not present in today’s market. Low inventory and massive buyer demand should keep the market propped up next year. Plus, mortgage lending practices are much safer than they used to be. That means there’s not a subprime mortgage crisis waiting in the wings.
At the time of this writing, the lowest 30-year mortgage rate ever was 2.65%. That’s according to Freddie Mac’s Primary Mortgage Market Survey, the most widely used benchmark for current mortgage interest rates.
Locking your rate is a personal decision. You should do what’s right for your situation rather than trying to time the market. If you’re buying a home, the right time to lock a rate is after you’ve secured a purchase agreement and shopped for your best mortgage deal. If you’re refinancing, you should make sure you compare offers from at least three to five lenders before locking a rate. That said, rates are rising. So the sooner you can lock in today’s market, the better.
That depends on your situation. It’s a good time to refinance if your current mortgage rate is above market rates and you could lower your monthly mortgage payment. It might also be good to refinance if you can switch from an adjustable-rate mortgage to a low fixed-rate mortgage; refinance to get rid of FHA mortgage insurance; or switch to a short-term 10- or 15-year mortgage to pay off your loan early.
It’s often worth refinancing for 1 percentage point, as this can yield significant savings on your mortgage payments and total interest payments. Just make sure your refinance savings justify your closing costs. You can use a mortgage calculator or speak with a loan officer to crunch the numbers.
Start by choosing a list of three to five mortgage lenders that you’re interested in. Look for lenders with low advertised rates, great customer service scores, and recommendations from friends, family, or a real estate agent. Then get pre-approved by those lenders to see what rates and fees they can offer you. Compare your offers (Loan Estimates) to find the best overall deal for the loan type you want.
Mortgage rates are rising, but borrowers can almost always find a better deal by shopping around. Connect with a mortgage lender to find out exactly what rate you qualify for.
Time to make a move? Let us find the right mortgage for you
1Today’s mortgage rates are based on a daily survey of select lending partners of The Mortgage Reports. Interest rates shown here assume a credit score of 740. See our full loan assumptions here.
In the first week of 2024, mortgage rates continued to stick around the mid 6% mark.
The 30-year fixed-rate mortgage averaged 6.62% as of Jan. 4, a slight increase from the 6.61% rate recorded on Dec. 28, according to Freddie Mac‘s Primary Mortgage Market Survey released on Thursday. The 15-year fixed-rate mortgage averaged 5.89% this week, down from 5.93% the prior week. HousingWire’s Mortgage Rates Center showed Optimal Blue’s average 30-year fixed rate on conventional loans at 6.68% on Thursday, up from 6.56% recorded at the same time last week.
“Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point,” Freddie Mac Chief Economist Sam Khater said in a statement. “However, since then rates have moved sideways as the market digests incoming economic data.”
Given the expectation of rate cuts this year from the Federal Reserve, Khater expects mortgage rates to continue drifting downward.
“While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise,” he added.
One year ago this week, the 30-year fixed-rate mortgage stood at 6.48%, while the 15-year rate stood at 5.73%.
According to a Realtor.com survey, 11% of surveyed prospective homebuyers said that they would be able to buy a home if rates went below the 7% threshold. Another 12% of surveyed homebuyers said that rates would need to dip below 6% for them to be able to buy a home. Meanwhile, more than a quarter (28%) said rates would need to dip below 4% to bring them into the market.
Currently, the typical outstanding mortgage rate is still under 4%. This discrepancy is not creating any incentive for sellers to sell their homes in the current rate environment, according to Realtor.com Economic Research Analyst Hannah Jones.
However, the cost of buying a home did come down in December, sending an encouraging signal to the market. As per a Redfin study, the median U.S. mortgage payment was $2,361 during the four weeks ending December 31, down $372 (-14%) from October.
According to Bright MLS Chief Economist Lisa Sturtevant, the lack of inventory remains the main issue, keeping home prices elevated.
“Young buyers are having to delay buying a home as it takes them longer to save for a down payment and they often have to make offers on multiple homes before they are successful,” Sturtevant said. “Many first-time homebuyers have been priced out of the market altogether.”
Sturtevant expects the lack of inventory to remain a challenge this year even as mortgage rates fall.
While average mortgage rates increased by a single basis point this week, they should move lower going forward in 2024 as inflation cools and the Federal Reserve reverses course, Freddie Mac said.
The Primary Mortgage Market Survey put the 30-year fixed at 6.62%, compared with 6.61% one week prior and 6.48% one year ago. It is the first increase in 10 weeks.
The 15-year FRM moved down 4 basis points to 5.89%, compared with 5.93% the prior week and 5.73% for the same period in 2023.
“Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point,” said Sam Khater, Freddie Mac’s chief economist, in a press release. “However, since then rates have moved sideways as the market digests incoming economic data.”
Zillow’s rate tracker has the 30-year FRM at 6.26% on Thursday morning, up 1 basis point from the prior day but down 3 basis points from the previous week’s average.
“The latest economic data is stronger than expected, meaning fewer policy rate cuts than previously thought could be in the cards for 2024,” said Orphe Divounguy, senior macroeconomist at Zillow Home Loans in a Wednesday evening statement.
Divounguy pointed to a couple of trends that might not be beneficial to rate movements. The tight labor market is likely to be a boon for housing, but it could also put less downward pressure on bond yields. The U.S. Treasury is expected to borrow $816 billion in the first quarter, likely bringing upward tension on those yields.
“While the last FOMC meeting sent rates falling at the end of 2023, market participants and the Fed will be looking for more disinflation in the new year,” Divounguy said. “Otherwise, Treasury yields could surge back up, pulling mortgage rates up with them.”
The benchmark 10-year Treasury, which had gotten back down to 3.79% on Dec. 27, was close to the 4% mark as of noon on Thursday morning.
“Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, we expect mortgage rates will continue to drift downward as the year unfolds,” Freddie Mac’s Khater said. “While lower mortgage rates are welcome news, potential homebuyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”
But signs of change are emerging. December’s lower mortgage rates led to a 5% year-over-year increase in net new listings, real estate brokerage HouseCanary said.
“With that said, any market turns are likely to be slow,” said HouseCanary CEO Jeremy Sicklick in a press release. “The mortgage rate lock-in effect is going to keep many would-be sellers who secured pre-pandemic mortgage rates of sub 5% little incentive to move, meaning low inventory will be a continuing trend.”