Let’s break out our crystal ball and see where the real estate market is headed over the coming year.
Expect Some Relief with Rates
Nobody is predicting the eye-poppingly low-interest rates of a few years ago (that was an anomaly). But forecasters do see a slight ebb in mortgage rates in 2024. Realtor.com’s 2024 Housing Market Forecast pronounces “housing affordability finally begins to turn around.” Their report predicts an average rate of 6.8% for 2024, falling to 6.5% by the end of the year.
For some historical perspective, 30-year fixed mortgage rates climbed from the 7% range to nearly 13% over the decade of the 70s. They fell to around 10% by the end of the 80s. Rates fluctuated over the next four decades, making an unusual dive below 4% as the 2010s rolled into the 2020s, before settling at today’s mid-6% range.
Home Prices May Fall
Not plunge. There likely won’t be any mass real estate bargains in 2024. However, insiders agree homes will be more affordable next year. The investment bank Morgan Stanley says home prices could fall as much as 5% in 2024, contingent on an economic slowdown and a rise in unemployment. Realtor.com takes a more conservative approach, forecasting that home prices will drop under 2% on average in 2024.
What should you do when mortgage rates drop?
Make your move. That may mean refinancing your current mortgage, buying a new home, or picking up an investment property. However you wish to take advantage of attractive mortgage rates, it’s important to be prepared. So you should:
- Hone your credit score. Equifax, Experian, and TransUnion offer free weekly online credit reports. Make sure yours is error-free.
- Improve your debt-to-income ratio (DTI). Letting your debt creep up is a sure way to put a dent in your mortgage eligibility. You want to shoot for 35% DTI or less.
- Maintain a lender-client relationship. Keeping in close contact with a seasoned mortgage professional is one of the best ways to stay prepared for a big financial move. So when rates fall, you’ll be well-positioned with the right financing option.