Tips for buying a home
It's been a tough year so far for homebuyers, who are facing the double whammy of high housing prices and rising loan rates. Unfortunately, the remainder of 2024 may not offer much relief, at least according to economists at mortgage buyer Freddie Mac.
"[W]e expect mortgage rates to remain elevated through most of 2024," Freddie Mac said in a Thursday housing outlook report. "These high interest rates will prompt prospective buyers to readjust their housing expectations, but we anticipate housing demand to remain high due to favorable demographics, particularly in the starter home segment."
Rates on a 30-year fixed mortgage are hovering above 7%, close to their highest point in more than 20 years. With inflation remaining stubbornly high, the Federal Reserve is expected to delay cutting its benchmark rate, and Freddie Mac said it's predicting that the central bank will only make one cut in 2024 — with that occurring toward the end of the year.
The Federal Reserve has said it would rather keep rates high until inflation cools to about 2% on an annual basis, rather than risk cutting too early and fueling another round of price spikes. But as a result, borrowers have been whalloped with higher loan costs for everything from credit cards to mortgages.
It's not only mortgage rates that have made homebuying this spring a tough proposition for many Americans, particularly those in middle- or low-income brackets. Tight inventory and rising home prices are pushing some buyers out of the market, with the median U.S. home sale price hitting a record $383,725,according to Redfin.
The cost of homeownership has grown so steep that it now takesa six-figure income to afford the typical home in the U.S., according to Zillow. For the first time in roughly two years, home prices did not fall in any of the nation's largest metro areas in April, Redfin said in a separatereport.
Higher mortgage rates have also had an impact on some current homeowners. Because many bought or refinanced their properties in the first years of the pandemic — when rates dropped below 3% — some are wary of selling their properties if it means taking on a new mortgage at today's rates.
Hesitant sellers combined with new construction failing to keep up with housing demand has created national shortage in both existing and new homes for sale, economists have said.
"Overall, tight inventory and higher for longer (mortgage) rates are still key barriers to home sale volumes," Freddie Mac said. "Mortgage rates above 7% continue to price out many prospective homebuyers and sellers have less incentive to sell."
