With mortgage rates falling to 6.62%, falling inflation, increasing wages, and high employment 2024 has the potential to be a strong year for real estate. Lower interest rates will ease home affordability and may encourage would-be home sellers to get off the fence and list their homes, improving the dire inventory shortage.
Despite the gloom some consumers have been feeling about the economy in general, consumer sentiment seems to be shifting to a more positive space as the University of Michigan survey of how consumers feel about economic conditions jumped +23% by the end of 2023 to a score of 73.3. The UOM survey of Consumer Sentiment jumped 16.6% to 69.7. UOM reports this is a result of “substantial improvements in the way that consumers view the trajectory of inflation.” Apparently, gas at $3 a gallon is the tonic American consumers need.
Mortgage rates have fallen by more than a full percentage point recently. For once, economists are very closely aligned in their predictions for mortgage rates in 2024. Most see rates headed for 6.5% with a few outliers predicting rates to go below 6%.
| Source | Projected 30-Year Mortgage Rate by End of 2024 | |||
| Mortgage Bankers Association |
6.1% |
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| Fannie Mae |
6.5% |
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| Realtor.com |
6.5% |
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| National Assn. of Realtors |
6.5% |
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| WSJ.COM Mortgage Rates Could Drop in 2024—But How Far? | ||||
Lower rates will make a difference to families trying to make their budgets fit into a new home. For example, on a $350,000 loan, a 7.5% rate would mean a monthly mortgage payment of $2,447. At 6.5% the payment drops to $2,212, a difference of $235 a month or $2,820 a year. The question is whether 6.5% is enough to motivate potential sellers to abandon their 3% mortgages and list their homes.
“Because there are so many people sitting idle,” states Brad Harding, Vice President of Home State Bank, “I think that we only need rates to come down into the 6’s and people will start to consider listing their homes. Eventually, people will start to realize that a rate in the 6’s is a solid rate. That rate is about 2% less than if they had purchased during the peak rates of 2023.” He continued, “I am optimistic that this can occur in 2024.”
The National Association of Realtors projects a 13.5% rise in existing home sales and a 19% increase in new home sales by the end of 2024. Fannie Mae is forecasting a 4.1% increase in home prices in 2024. The University of Illinois Stuart Handler Department of Real Estate is forecasting Chicago area home prices to increase by 8.3% in 2024 to a median price of $324,000. Sales are expected to continue on a downward path due to the lack of available inventory.
If you are thinking of buying or selling a home, we can find you an experienced professional in your area. Contact us today at 847.485.2500 for a free real estate review.