With U.S. home prices dropping and mortgage rates projected to dip sometime in 2024, homebuyers might be wondering if they should wait until next year to land a more affordable deal.
But with the economic outlook particularly murky right now, buyers shouldn’t be overly concerned with timing their purchase, real estate experts tell CNBC Make It.
The average interest rate for the benchmark 30-year fixed mortgage reached 7.08%, as of Monday. However, with the economy expected to cool and possibly dip into a recession, many recent forecasts expect rates to drop to 6% or below in 2024, including a Fannie Mae projection of 5.2%.
A drop of 1% in mortgage rates works out to about $200 in monthly mortgage costs for a 30-year fixed rate on a $300,000 home loan, according to mortgage calculator.
Meanwhile, home prices continue to weaken and are already down 2.7% from their June 2022 peak, according to the S&P Case-Shiller home price index. Forecasts are a mixed bag, but most expect prices to either remain flat or continue cooling by 1% to 10% from 2022′s highs.
Should you buy a home in 2023 or 2024?
While it might be tempting to hold off on buying a property until a better deal arrives, there’s no guarantee mortgage rates will drop or homes will become more affordable in 2024, say real estate analysts and economists interviewed by CNBC Make It.
Despite forecasts of lower mortgage rates in 2024, don’t expect them to bottom out to the record lows of the past decade, either, says Lawrence Yun, chief economist at the National Association of Realtors.
“Returning to mortgage rates of 3% or 4% isn’t going to happen, in my view,” says Yun, who points out historically rates have been higher. The low rates of 2020 and 2021 were “unique” and those that got them were “lucky,” he says.
Plus, if “mortgage rates go back down to that level, people can always refinance their mortgages,” says Yun.
As for home prices, a price correction is largely expected to be short-lived due to a chronic shortage of homes. Declining mortgage rates could also stoke demand, which would likely push prices higher. It’s also important to note real estate trends vary by region, which means home prices in your area might not drop in either 2023 or 2024.
“I wouldn’t necessarily wait around and see if you can get the best possible deal because timing the housing market is very difficult,” says Cristian deRitis, deputy chair economist at Moody’s Analytics. His firm predicts another 5% to 10% drop in home prices from their peak over the next 18 to 24 months, after which prices will start rising again.
While professional house flippers might need to worry about short-term fluctuations in home prices and interest rates, regular homebuyers who plan to live in their homes more than five years should be less concerned about timing the market, he says.
The short-term forecast for home prices is “a modest decline,” he says. “You might overpay a little bit in the short term, but if your tenure is long enough, it’s not going to make much of a difference.”
As an expert in real estate and mortgage markets, I can provide valuable insights into the factors influencing home prices and mortgage rates, drawing on my extensive knowledge of the industry. My expertise is grounded in a comprehensive understanding of economic trends, mortgage market dynamics, and real estate cycles.
The current article discusses the potential impact of dropping U.S. home prices and projected mortgage rate decreases in 2024. To support this analysis, let's break down the key concepts mentioned in the article:
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Mortgage Rates and Projections:
- The article mentions that the average interest rate for the benchmark 30-year fixed mortgage is at 7.08%, with projections indicating a potential dip to 6% or below in 2024.
- Notably, a 1% drop in mortgage rates translates to approximately $200 in monthly savings for a 30-year fixed-rate mortgage on a $300,000 home loan.
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Home Prices:
- According to the S&P Case-Shiller home price index, home prices have already declined by 2.7% from their peak in June 2022.
- Forecasts vary, but there's an expectation that home prices may either remain flat or continue cooling by 1% to 10% from 2022's highs.
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Economic Outlook and Recession Concerns:
- The economic outlook is described as murky, with concerns about a possible economic downturn and recession.
- Despite the projected drop in mortgage rates, the article suggests that buyers should not be overly concerned about timing their purchase based on economic uncertainties.
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Expert Opinions and Analysis:
- Real estate experts, including Lawrence Yun, Chief Economist at the National Association of Realtors, provide insights. Yun cautions against expecting mortgage rates to reach the record lows of the past decade, emphasizing that historically, rates have been higher.
- There's a discussion about the short-lived nature of a potential price correction due to a chronic shortage of homes. Additionally, declining mortgage rates could contribute to increased demand, potentially driving prices higher.
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Regional Variations:
- The article emphasizes that real estate trends vary by region, indicating that home prices in a specific area might not follow the national trend of decline or cooling.
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Timing the Market and Long-Term Perspective:
- Real estate analysts advise against waiting for the best possible deal, highlighting the difficulty of timing the housing market.
- While short-term fluctuations are acknowledged, the advice for regular homebuyers planning to live in their homes for more than five years is to be less concerned about market timing.
In summary, my expertise in real estate and mortgage markets enables me to affirm the complexity of these factors and provide a nuanced understanding of the considerations that homebuyers should take into account when deciding whether to buy in 2023 or wait until 2024.
