Why 2024 could be good for homebuyers
A new year brings new promises for millions, particularly those who may have been hurt financially in 2023. With inflation and high interest rates meant to combat it, many Americans had a less-than-ideal 12 months. Homebuyers, in particular, suffered as they saw the record-low interest rates of 2020 and 2021 evaporate. Instead, mortgage rates hit their highest point since 2000 in August 2023.
That all said, the economy is changing once again. And there are some particularly encouraging signs for homebuyers and existing owners looking to refinance. Below, we'll break down these signs, which could all be pointing to a better year for the real estate market.
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Why 2024 could be good for homebuyers
Here are three reasons why 2024 could be a better one for homebuyers.
Inflation is cooling
Inflation hit its highest point in more than 40 years in June 2022 but has decreased steadily since that time. While still above the Federal Reserve's target goal of 2%, it was just 3.1% in November, the last time an inflation report was made available.
High inflation means less purchasing power for the dollar and higher interest rates meant to combat it, but with inflation coming down in recent months, it's a positive for your wallet — and a reliable sign that interest rates won't be rising anymore. Instead, they could be dropping soon.
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Interest rates could drop
The benchmark interest rate range currently sits between 5.25% and 5.50% — a 22-year high. While that's not a positive for homebuyers, it hasn't moved from that range since it was met last July. And the Fed is already hinting at rate drops this year, should their attempts to rein in inflation remain successful.
A cut, then, to the benchmark rate could result in a drop in mortgage rates. Rates have already started falling in anticipation of this drop and as a result of recent interest rate pauses. An actual cut in 2024, then, could only add to the fortune for prospective homebuyers.
Inventory may improve
Available houses to purchase in 2023 were low. According to one report in June 2023, the number of homes ready to purchase dropped in 21 of the 50 largest metropolitan areas compared to the same time in 2022. And it's easy to understand why. With millions of homeowners locked in at mortgage rates below 4% — and the going rate above 6% for a good portion of the year — they'd stand to lose money by moving and buying a home at a higher rate.
That said, if rates drop in 2024, even slightly, many existing homeowners may feel comfortable enough to move somewhere else. When they do so, they'll likely sell their existing property, thus boosting home inventory. If enough owners do this across the country, it could produce a substantial increase in home inventory for prospective buyers to choose from.
The bottom line
2023 may not have been an ideal year for homebuyers, but there are growing indicators that 2024 could be a safe year to act. With inflation cooling and the prospect of interest rates dropping on the horizon, 2024 could be a much better year for homebuyers. Combined with the prospect of a greater housing inventory, buyers should start familiarizing themselves with the homebuying process now so that they're ready to act if, or when, the real estate market takes off again.
