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After a year full of record-high interest rates and home prices, experts say there are signs of improvement for the housing market in 2024.
In December, the average mortgage rates dropped below 7% for the first time since August and after an 8% peak in October, which pushed housing costs to the highest level since 2000.
The average rate on a 30-year fixed rate mortgage dropped to 6.95% from 7.03% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.31%. Meanwhile, the 15-year fixed rate mortgage jumped to 6.38% from 6.29%.
“The decline poses good news for buyers,” said Jessica Lautz, deputy chief and vice president of research at the National Association of Realtors.
Interest and mortgage rates will slowly decline, giving people a “little bit more room in their budgets” when it comes to mortgage payments, experts say. Additionally, inventory is growing as new listings creep back up, said Nicole Bachaud, a senior economist at housing site Zillow.
Lower interest rates should come as encouraging news for homebuilders.
“It should be easier for builders as rates go down, as they need to borrow to build,” said Lautz. Homebuyers should see a greater supply as more homes will be built, Lautz explained.
However, consumers may still feel discouraged, added Lautz, as affordability may still be a challenge.
“We’re expecting home price appreciation to stay flat for the next year nationally, so prices aren’t really going to move much from where they’re at now,” Bachaud said.
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High costs kept would-be buyers as renters
Homes were 52% more expensive than rentals this year, the highest gap on record, according to the Zumper Annual Rent Report for 2023.
High costs in the buying market have delayed homeownership for many buyers and kept inflation-strapped consumers in the rental market, some explained.
The national rent price for a one-bedroom apartment is $1,496, down 10% from a year ago. The last time there was a decline was during the pandemic, from July to October 2020, Zumper found.
“Over the course of the last few years, there were actually a lot of buildings in the rental sector, so that may have helped to alleviate rental prices. But they’re still at a high price point,” Lautz said.
Lautz expects more movement in the rental market next year as many young adults look for a place to live.
While most young adults either stayed with parents or paired up with roommates during the pandemic to relieve costs, they might seek independence next year, whether because “a CEO [is] saying you have to come back into the office or they’re ready to move out,” said Lautz.
New York City is seeing a surging demand for rental housing in commutable areas with easy access to downtown and midtown Manhattan in 2024, according to data from…
Read More: Here’s what to expect in 2024 if you want to buy a home