Home buyers and sellers are now eager to get off the sidelines after mortgage rates soared to two-decade highs and inventory plummeted, pushing prices high.
In October 2023, the contract rate for a 30-year fixed mortgage loan hit 7.79%, marking the highest rate recorded in 23 years. Since then, rates have fallen to 6.49% for the week ending Aug. 15, according to Freddie Mac.
The median sale price of a home in the US has also soared to $442,451 as of June. That is a 4.0% increase year-over-year, per data from Redfin.
The housing market conditions are showing signs of easing throughout the rest of 2024 and may continue to improve in 2025. Here are some of the predictions experts have for the housing market.
On Mortgage Rates
Mortgage rates have recently dropped to the lowest level recorded in over a year. That being said, they are still way above the 3% rate in 2022.
Part of the reason why mortgage rates soared is the Federal Reserve's move to raise their benchmark rate since early 2022 in an effort to bring down inflation. However, the Fed has signaled it would be cutting rates this fall as the inflation rate shows signs of cooling. While the Fed's benchmark rate does not directly influence mortgage rates, the two often move in the same direction.
Despite a cut, mortgage rates are likely to see a radical change. Fannie Mae predicts rates could end at 6.7% this year. The National Association of Realtors (NAR) forecasts rates to average 6.9% in the third quarter of 2024 and decline to between 6.5% and 6.7% at the end of the year. The Mortgage Bankers Association (MBA) believes rates will average 6.6% in Q4 and fall further to 6.4% in the first quarter of 2025.
On Home Prices
While mortgage rates are expected to fall throughout 2024 and through the first quarter of next year, home prices are predicted to continue increasing. Analysts at Realtor.com expect home prices to rise by 4.6% by the end of the year as lower mortgage rates bring more buyers back to the market.
This prediction echoes forecasts from Fannie Mae and the Mortgage Bankers Association that home prices will be 6.1% and 4.5% higher by the end of this year, respectively.
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