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This month we are diving into 3 hot topics that are affecting the housing market: mortgage rates, the economy, and home prices.

 

Mortgage Rates

 

Although mortgage rates have been on a downward trend since October, they are still quite volatile.

 

 

In December, Fannie Mae projected out the mortgage rates for 2024. However, those projections were adjusted in February.

 

 

And, we see a number beginning with a 5 in the fourth quarter of 2024. While this may change, it is a positive outlook for what is to come.

 

The Economy

 

One of the things that comes into play with mortgage rates is the economy. The Wall Street Journal’s survey of economists also ended up updating their predictions of a recession over the next 12 months.

 

 

More economists are now predicting a softer landing than they did a year ago.

 

At least right now, the fundamentals of the economy, despite some hiccups, are doing pretty good. While things are far from perfect, the economy is probably doing better than people want to give it credit for.

Jacob Channel, Senior Economist, LendingTree

 

The Unemployment Rate

 

This is likely due to their confidence in the Federal Reserve working to control things. Unemployment can be a common indicator of this, and the Wall Street Journal has predicted unemployment to stay below 5%, which bodes well for the economy and the housing market.

 

 

Foreclosures

 

Another important indicator is foreclosures, and those metrics are down when compared to the pre-pandemic numbers. It is important to note that we focus on the metrics from before COVID, because of the moratorium in which federal and/or state laws made it more difficult to foreclose on a home.

 

 

Active foreclosure inventory is down 25% when compared to before the foreclosure moratorium.  That’s excellent news. And maybe that is due to the amount of equity people have right now. They can use that to get out of the terrible financial crisis that could result in foreclosure.

 

Equity

 

Equity is what makes today’s situation unlike the housing market of 2008.

 

 

Almost 70% of homes in this country have more than 50% equity. That could be what saves someone from the unimaginable situation of foreclosure.

 

Home Prices

 

Last year was full of news articles on how homes were predicted to lose 10% or even 20% in value.

 

 

But Freddie Mac reported the final home price appreciation rate for 2023 at 7%! Far above the average of 4.86% since 1980.

 

 

In Tallahassee, we saw a 7.4% increase in home prices from 2022 to 2023. That’s outstanding, considering that everyone was saying the sky was falling.

 

House prices rose in 49 states between Q4 of 2022 and Q4 2023.House prices rose in 96 of the top 100 largest metropolitan areas over the last four quarters. All nine census divisions had positive house price changes year-over-year.

FHA Home Price Index

 

Overall, it appears the east coast is seeing more favorable appreciation.

 

 

 

So, what lies ahead for 2024?

 

…as recent surge in mortgage application data has shown, following a drop in rates, buyers are anxiously waiting to jump into the market. That means that 2024 is likely to show another year of home price highs.

Selma Hepp, Chief Economist, CoreLogic

 

This year will likely be another year of home price highs. A better rate environment and the overall lack of inventory will drive more demand into the market. And the industry experts are noticing that, too. 6 of the industry’s leaders projected a 2% home price appreciation just 4 months ago.

 

 

These same 6 experts are now projecting an average of 3.2% home price appreciation for 2024. Expect people to become more optimistic about home prices as time goes on.

 

And what lies ahead for the next 5 years? For that we look to the Home Price Expectations Survey (HPES). The HPES is a nationwide panel of over 100 economists, real estate experts, and investment & market strategists. Their 5-year forecast calls for healthy appreciation through 2028.

 

 

Renting vs Buying

 

Whether or not it is better to rent or buy a home is dependent on your circumstances and lifestyle. But if the reason you are not buying is because you think home prices will fall, we’ve just shown the data doesn’t say that. Which brings us back to equity – the amount you could earn over time as you pay off your mortgage and your home appreciates in value. A $400,000 home could have over $83,000 in equity within 5 years!

 

 

Bottom Line

 

There are 3 market indicators that the real estate industry will be watching closely these next few months: the economy, mortgage rates, and home prices. Mortgage rates have been on an overall decrease and are expected to continue that trend. Less economists are predicting a recession, unemployment is under control, and foreclosures are low. Finally, home prices are forecasted to remain strong and appreciation is projected to continue for the foreseeable future.  

 

Tallahassee Stats February 2024