Mortgage rates finally expected to dip below 6% in 2024, but affordability remains low

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Good news for potential homebuyers in 2024: mortgage rates for 30-year mortgages are set to drop below 6% by the end of the year, a Fannie Mae forecast reports.

2023 was one of the most volatile years in history for the housing market. Last year saw the least amount of existing home sales since the Great Financial Crisis in 2008.

The Fed cutting rates throughout the year paired with a recovering economy will lead to this slow upturn in the housing market. Plus, the effects of the 2020-2021 price hikes and home demand are lessening, balancing out the market a bit, according to Fannie Mae.

Single-family mortgage originations are expected to hit $1.98 trillion in 2024 and rise even higher to $2.44 trillion in 2025. This is a large increase from the $1.50 trillion in originations in 2023.

If you think you’re ready to shop around for a home loan, consider using Credible to help you easily compare interest rates from multiple lenders in minutes.

HOME BUYERS STRUGGLE IN 2023, BUT HOMEOWNERSHIP RATE COULD RISE IN 2024

Housing affordability remains low, but home sales will rise

Housing affordability hit its lowest point in 2023, with just 15.5% of listings considered affordable for an average U.S. household, according to Redfin. To give some context, in 2022, 20.7% of listings were affordable and before the pandemic, over 40% of homes were deemed affordable.

Certain groups bore the brunt of this lack of affordable housing, Redfin reports. Black households saw a lower level of affordability, with just 6.9% of homes in 2023 designated affordable for the community. Latino households also struggled to find affordable home listings as 10.4% of homes on the market were affordable for them in 2023.

For white households in 2023, 21.6% of homes were considered affordable. Asian households saw the highest affordability rate with over 27% of homes considered affordable.

While home affordability isn’t set to budge much this year, home listings are slowly increasing. Many potential sellers delayed listing their home in 2023 due to high mortgage interest rates, and now that rates are declining, they’re more likely to list.

Fannie Mae’s forecast for the last quarter of 2024 reports the potential for 4.5 million units sold. That’s up from 3.8 million in Q4 2023.

To take advantage of falling interest rates, head to Credible to start your mortgage application process and compare lenders and your rates all in one place.

JUST OVER 15% OF HOME LISTINGS WERE CONSIDERED AFFORDABLE IN 2023: REDFIN

New construction still going strong

With limited listings on the market and inflated prices for those that are listed, new construction remains a popular choice for many buyers. December saw an increase in new construction homes, up both from November 2023 and December of 2022.

Census Bureau information shows building permits for privately-owned houses reached 1,495,000, up 1.9% from November. The adjusted annual rate is also 6.1% higher than in December 2022.

“The new home market has been extraordinary in 2023, and I think heading into 2024, we’re going to have the golden age of new home construction,” David O’Reilly, CEO of Howard Hughes, said in an interview. “Because not only can you pick size, location … but national home builders have been able to buy down mortgage rates and offer a lower mortgage rate for buyers.”

The generation of buyers most interested in new construction is overwhelming millennials. Almost 41% of new construction buyers were millennials in 2023, a Zillow study shows.

New construction buyers also tend to have higher incomes than the average existing home buyer. Zillow reported that, in 2023, the average buyer considering a new construction home made an average of just over $118,000 per year, while buyers looking at existing homes had an income of about $96,000.

If you’re looking to purchase a home in today’s market, you can explore your mortgage options by visiting Credible to compare rates and lenders and get a mortgage preapproval letter in minutes.

NEW CONSTRUCTION HOMES POPULAR AMONG MILLENNIALS DESPITE HIGH HOUSING COSTS

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