The 2024 housing market has been challenging, with high mortgage rates and limited inventory making it tough for buyers. While a housing crash is unlikely, experts predict conditions will improve, making home buying easier in the near future.
2024 Housing Market Overview
In early 2024, home prices reached new highs, and mortgage rates stayed near 20-year peaks, leading to lower demand. However, mortgage rates dropped over the summer, before rising again to 6.24% in October. Prices also saw a 2.7% increase, averaging $359,892 in September. Experts expect mortgage rates to ease and price growth to moderate in 2025.
Why Are Home Prices So High?
Home prices rise due to supply and demand imbalances. The pandemic saw a surge in demand as mortgage rates fell, while inventory remained low. Sellers were hesitant to list properties, which drove prices higher. Though prices may not drop significantly, any decrease would be moderate due to tight supply.
Key Trends Shaping the Housing Market
Inflation played a key role in the housing market over the last few years. It peaked at 9.1% in 2022, which led the Federal Reserve to raise interest rates and push up mortgage rates. Fortunately, inflation cooled to 2.4% in September 2024, prompting the Fed to lower rates, which could improve mortgage affordability in 2025. Mortgage rates remain high compared to pandemic lows, but are expected to ease. Many buyers have stayed out of the market due to high rates, which has slowed home price growth. Additionally, many homeowners are reluctant to sell because they have low mortgage rates, creating a “lock-in effect” that has limited the housing supply. The U.S. continues to face a housing shortage, particularly of affordable homes. Builders are struggling to meet demand, partly due to a lack of skilled labor and a slow recovery from the Great Recession, when housing construction ground to a halt.
Predictions for 2024 and 2025
Home prices are expected to rise moderately in 2024, with forecasts ranging from 3.6% to 5.8%. Price growth is predicted to slow in 2025, with increases ranging from 1.6% to 3.6%. While national trends suggest prices will rise, local markets may experience corrections, especially in areas that saw rapid price growth during the pandemic. For instance, in Austin, home prices have dropped 4.8% year-over-year since mid-2022.
Is It a Good Time to Buy?
The decision to buy a home depends on personal circumstances. If buying a home fits your budget and long-term plans, now might be the right time to buy. Though some buyers are waiting for mortgage rates to drop, this could lead to higher home prices when rates do ease. Many lenders are offering “buy now, refinance later” deals, allowing buyers to refinance when rates drop.
Home prices are expected to rise in 2024, with growth slowing in 2025. While significant price drops are unlikely, easing mortgage rates should improve conditions for buyers. If you’re considering purchasing a home, it’s important to understand local market trends and shop around for the best mortgage deal.
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