Mortgage Rates Expected to Drop in 2024, But Housing Affordability Remains a Concern
Realtor.com predicts that mortgage rates will drop in 2024, but not enough to significantly improve housing affordability for potential homebuyers. The forecast suggests a modest decrease in the 30-year fixed mortgage rate, dropping to an average of 6.8% in 2024. However, this small step may not be sufficient to counter the high housing costs and encourage more people to enter the market.
Small Step Towards Improved Affordability
Realtor.com’s chief economist, Danielle Hale, explains that although they expect affordability to improve in 2024, it will be a relatively small step in that direction. While the mortgage rate is projected to drop, it will still be higher than the rates experienced a year ago. As a result, affordability will remain worse than it was in previous years.
New Listings and Home Prices
The housing market has seen a slight increase in the number of newly listed homes in November, growing 7.5% from the previous year. This marks the first gain in 17 months and could be an indication that the frozen housing market is starting to thaw. However, despite the increase in listings, median home prices have only risen by 1%, now standing at $420,000. Higher mortgage rates have increased the monthly cost of financing a home by 7.9%, making it more difficult for potential homebuyers to afford their housing payments.
Overall, Realtor.com forecasts that mortgage rates will average 6.8% in 2024, with a potential drop to 6.5% by the end of the year. Home prices are expected to decrease by 1.7%, contrasting the mostly annual gains seen since 2012. Despite the turbulence in the current market, home prices have risen 6.2% year-over-year as of September 2023, according to Case-Shiller.
Although the housing market is expected to improve slightly in 2024, the problematic lock-in effect will likely persist. Homeowners who locked in their mortgages at sub-3% rates a few years ago have little incentive to sell their homes now, as they would end up buying homes with much higher monthly payments at the current 7%-plus mortgage rates. A small decline to 6.8% may not be enough to prompt current homeowners to sell.
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Orginal article: Link To Article – provided by Kansas City Realtors