The new year is right around the corner, and you might be wondering if 2024 will be the right time to buy or sell your home. If you want to make the most informed decision possible, it’s important to know what the experts have to say about what's ahead for the housing market. Spoiler alert: the projections may be better than you think. Here’s why.

Experts Forecast Ongoing Home Price Appreciation

Take a look at the latest home price forecasts from Fannie Mae, the Mortgage Bankers Association (MBA), and the National Association of Realtors (NAR):

 

 

As you can see in the orange bars on the left, on average, experts forecast prices will end this year up about 2.8% overall, and increase by another 1.5% by the end of 2024. That’s big news, considering so many people thought prices would crash this year. The truth is, prices didn’t come tumbling way down in 2023, and that’s because there just weren’t enough homes for sale compared to the number of people who wanted or needed to buy them, and that inventory crunch is still very real. This is the general rule of supply and demand, and it continues to put upward pressure on prices as we move into the new year.

Looking forward, experts project home prices will continue to rise next year, but not quite as much as they did this year. Even though the expected rise in 2024 isn't as big as in 2023, it's important to understand home price appreciation is cumulative. In simpler terms, this means if the experts are right, according to the national average, after your home's value goes up by 2.8% this year, it should go up by another 1.5% next year. That ongoing price growth is a big part of why owning a home can be a smart decision in the long run.

Projections Show Sales Should Increase Slightly Next Year

While 2023 hasn’t seen a lot of home sales relative to more normal years in the housing market, experts are forecasting a bit more activity next year. Here’s what those same three organizations project for the rest of this year, and in 2024 (see graph below):

 

 

While expectations are for just a slight uptick in total sales, improved activity next year is a good thing for the housing market, and for buyers and sellers like you. As people continue to move, that opens up options for hopeful buyers who are looking for a home.

So, what do these forecasts show? The housing market is expected to be more active in 2024. That may be in part because there will always be people who need to move. People will get new jobs, have children, get married or divorced – these and other major life changes lead people to move regardless of housing market conditions. That will remain true next year, and for years to come. And if mortgage rates come down, we’ll see even more activity in the housing market.

Bottom Line: If you’re thinking about buying or selling, it’s important to know what the experts are forecasting for the future of the housing market. When you’re in the know about what’s ahead, you can make the most informed decision possible. Let's chat about the latest forecasts together, and craft a plan for your next move.

Joe

Week Ending 9/22/2023

Fed Projections

From the Joe Smith Team at Cross Country Mortgage At the highly anticipated meeting on Wednesday, Fed officials confirmed their outlook for short-term rates to remain at elevated levels for quite a while. While this was not much of a surprise, the news caused mortgage rates to climb to their highest levels in decades.

As expected, the Fed made no change in the federal funds rate, and the statement released after the meeting was very similar to the prior one. The key information was the latest set of projections from officials for future monetary policy. First, the median forecast from 19 Fed officials is for an additional 25 basis point rate hike this year. In addition, they anticipate that the federal funds rate will remain near current levels for a substantially longer period of time than in the last set of projections released three months ago. The bottom line is that officials currently do not see rate cuts coming as soon as investors expected. According to Chair Powell, they want to see "convincing evidence" that inflation is on track to return to target levels before loosening monetary policy. In housing news, sales of existing homes in August fell slightly from July and were 15% lower than last year at this time. Inventory levels stand at just a 3.3-month supply nationally, far below the 6-month supply typical in a balanced market. The median existing-home price of $407,100 was 4% higher than last year at this time. There is no doubt that additional inventory of homes available for sale continues to be desperately needed, but the latest data contained mixed news. Overall housing starts in August were disappointing with a larger than expected decline of 11% from July to the lowest level since June 2020. Most of the weakness came from the multi-family sector, however, with just a modest drop in single-family units. More encouragingly, building permits, a leading indicator, increased for both single-family and multi-family units. Builders again cited tight credit conditions for loans and high prices for land, labor, and materials as obstacles to a faster pace of construction.

Week ahead

Investors will continue to watch for Fed officials to elaborate on their plans for future monetary policy. For economic reports, Consumer Confidence and New Home Sales will be released on Tuesday. Personal Income and the PCE price index, the inflation indicator favored by the Fed, will come out on Friday.

Tue 9/26 New Home Sales Tue 9/26 Consumer Confidence Fri 9/29 Core PCE Fri 9/29 Personal Income

Mortgage Rates Rose 0.15% Dow Fell 500 NASDAQ Fell 400

Joe Smith Branch Manager / SVP M 617-308-3337 D 617-236-1555 W crosscountrymortgage.com/the-joe-smith-team E jsmith@ccm.com We would like to thank our partner, MBSQuoteline for their insightful information. All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.

 

If you're planning to buy a home one thing to consider is what experts project home prices will do in the future and how that might affect your investment. While you may have seen negative news over the past year about home prices, they’re doing far better than expected and are rising across the country. And data shows, experts forecast home prices will keep appreciating.

Experts Project Ongoing Appreciation

Pulsenomics polled over 100 economists, investment strategists, and housing market analysts in the latest quarterly Home Price Expectation Survey (HPES). The results show what the panelists project will happen with home prices over the next five years. Here are those expert forecasts saying home prices will go up every year through 2027 (see graph below):If you’re someone who was worried home prices would fall because of stories you’ve read online, here's the big takeaway. Even though home prices vary by local market, experts project prices will continue to rise across the country for years to come. And these numbers indicate the return to more normal home price appreciation.

And while the projected increase in 2024 isn’t as large as 2023, it’s important to recognize home price appreciation is cumulative. In other words, if these experts are correct, after your home’s value rises by 3.32% this year, it’ll appreciate by another 2.17% next year. This is a good example of why owning a home is a choice that wins big over time.

What Does This Mean for You?

Once you buy a home, price appreciation raises your home’s value, and that grows your household wealth. To see how a typical home's value could change in the next few years using the expert projections from the HPES, check out the graph below:In this example, let’s say you bought a $400,000 home at the beginning of this year. If you factor in the forecast from the HPES, you could potentially accumulate more than $71,000 in household wealth over the next five years.

So, if you're thinking about whether buying a home is a good choice, remember how it can be a powerful way to grow your wealth in the long run. 

Bottom Line: According to the experts, home prices are expected to grow over the next five years at a more normal pace. If you’re ready to become a homeowner, know that buying today can set you up for long-term success as home values (and your own net worth) grow. Get in touch so we can start your homebuying process today.

 

The National Association of Realtors (NAR) is set to release its most recent Existing Home Sales (EHS) report tomorrow. This monthly release provides information on the volume of sales and price trends for homes that have previously been owned. In the upcoming release, it’ll likely say home prices are down. This may seem a bit confusing, especially if you’ve been following along and reading the blogs saying home prices have hit the bottom and have since rebounded.

So, why would this say home prices are falling when so many other price reports say they’re going back up? It all depends on the methodology of each one. NAR reports on the median home sales price, while some other sources use repeat sales prices. Here’s how those approaches differ.

The Center for Real Estate Studies at Wichita State University explains median sales prices like this:

“The median sale price measures the ‘middle’ price of homes that sold, meaning that half of the homes sold for a higher price and half sold for less . . . For example, if more lower-priced homes have sold recently, the median sale price would decline (because the “middle” home is now a lower-priced home), even if the value of each individual home is rising.”

Investopedia helps define what a repeat sales approach means:

“Repeat-sales methods calculate changes in home prices based on sales of the same property, thereby avoiding the problem of trying to account for price differences in homes with varying characteristics.”

The Challenge with the Median Home Sales Price Today

As the quotes above say, the approaches can tell different stories. That’s why median home sales price data (like EHS) may say prices are down, even though the vast majority of the repeat sales reports show prices are appreciating again.

Bill McBride, Author of the Calculated Risk blog, sums the difference up like this:

“Median prices are distorted by the mix and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices.”

To drive this point home, here’s a simple explanation of median value (see visual below). Let’s say you have three coins in your pocket, and you decide to line them up according to their value from low to high. If you have one nickel and two dimes, the median value (the middle one) is 10 cents. If you have two nickels and one dime, the median value is now five cents.

In both cases, a nickel is still worth five cents and a dime is still worth 10 cents. The value of each coin didn’t change.

That’s why using the median home sales price as a gauge of what’s happening with home values may be confusing right now. Most buyers look at home prices as a starting point to determine if they match their budgets. But most people buy homes based on the monthly mortgage payment they can afford, not just the price of the house. When mortgage rates are higher, you may have to buy a less expensive home to keep your monthly housing expense affordable.

That’s why a greater number of ‘less-expensive’ houses are selling right now – and that’s causing the median home sales price to decline. But that doesn’t mean any single house lost value. 

When you see the stories in the media that prices are falling later this week, remember the coins. Just because the median home sales price changes, it doesn’t mean home prices are falling. What it means is the mix of homes being sold is being impacted by affordability and current mortgage rates.

For a more in-depth understanding of home price trends and reports, let’s connect. 

 

There’s been a lot of focus on higher mortgage rates and how they’re creating affordability challenges for today’s homebuyers. It’s true that rates climbed dramatically since the record-low we saw during the pandemic. But home affordability is based on more than just mortgage rates – it’s determined by a combination of mortgage rates, home prices, and wages.

Considering how each one of these factors is changing gives you the full picture of home affordability today. Here’s the latest.

1. Mortgage Rates

While mortgage rates are higher than they were a year ago, they’ve hovered primarily between 6% and 7% for nearly eight months now (see graph below):

As the graph shows, mortgage rates have experienced some volatility during that time. And even a small change in mortgage rates impacts your purchasing power. That’s why it’s so important to lean on your team of real estate professionals for expert advice to stay up to date on what’s happening in the market. While it’s hard to project where mortgage rates will go from here, many experts agree they’ll likely continue to remain around 6%-7% in the immediate future. 

2. Home Prices

Over the past few years, home prices appreciated rapidly as the record-low mortgage rates we saw during the pandemic led to a surge in buyer demand. The heightened buyer demand happened while the supply of homes for sale was at record lows, and that imbalance put upward pressure on home prices. However, today’s higher mortgage rates have slowed down price appreciation.

And, the truth is, home price appreciation varies by market. Some areas are seeing slight declines while others have prices that are climbing. As Selma Hepp, Chief Economist at CoreLogic, explains:

“The divergence in home price changes across the U.S. reflects a tale of two housing markets. Declines in the West are due to the tech industry slowdown and a severe lack of affordability after decades of undersupply. The consistent gains in the Southeast and South reflect strong job markets, in-migration patterns and relative affordability due to new home construction.”

To find out what’s happening with prices in your local market, reach out to a trusted real estate agent.

3. Wages

The most positive factor in affordability right now is rising income. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time: 

Higher wages improve affordability because they reduce the percentage of your income it takes to pay your mortgage since you don’t have to put as much of your paycheck toward your monthly housing cost.

Home affordability comes down to a combination of rates, prices, and wages. If you have questions or want to learn more, reach out to a real estate professional who can explain what’s happening locally and how these factors work together.

Bottom Line

If you’re planning to buy a home, knowing the key factors that impact affordability is important so you can make an informed decision. To stay up to date on the latest on each, let’s connect today.

That’s when the Federal Reserve started tightening the screws, ending our sugar high of historically low interest rates in an attempt to get a hold on inflation. The post-covid-lockdown period has certainly come with a variety of challenges and uncertainty.

As we start to transition into this period, it’s worth asking what the housing market is transitioning to.

Do you think it could be...normal?

3% interest rates are certainly not normal. Having 50 buyers bid on a house is not normal (as nice as it was for sellers).

I’m not trying to say that high interest rates are a good thing.

But what, historically, is a high interest rate? 5%? 6%? Is even 7% a high rate? Not historically. Just for perspective, I’ve got folks in my office who laugh and tell me, “I bought my first place at 18%!” (BTW, that's most assuredly not normal either).

Here is a link to the history of mortgage rates over the last 50 or so years. 

Even at higher interest rates, the sky will not fall. Sellers will still be getting a nice return on their home. Buyers will not have to get into ridiculous bidding wars over homes. There is no bubble to burst.

Will a recession come? Maybe not tomorrow or even this year, but...Yes! They always do!

Here's my recession story: I bought my previous home in August of 2008. I paid $640,000. In 2010, in the middle of a historic economic meltdown, the unit next door to mine, essentially the same unit, sold for $575,000. In 2020, I sold my unit for $1.1m.

Let’s get a grip on what we have here in the Boston area: A super-strong economy with varied industries creating thousands of jobs. A vibrant city that is the envy of most of the rest of the country.

Over the last decades, Boston real estate has been a super investment.

Even in the 2009 meltdown, we saw minimal losses and a vibrant recovery. At this time, our market is much healthier. Home equity far surpasses what it was then. The average credit rating of current mortgage borrowers is significantly higher. The structural problems in the mortgage industry have been mitigated to a high degree.

And one more thing: Inventory. Levels of inventory here over the last 20 years or so have been low relative to most other markets. Absorption rates reflecting low levels of inventory, the envy of most other locations in the country, remain remarkably steady, even in relatively hard times, aside from a few spikes. As of June 15th, 2022, we had only 2.44 months of inventory in our downtown neighborhoods. For the same period of 2020 as we were emerging from Covid lockdown, we had 2.94. During 2009-10, they were higher, but nothing approaching the levels of unsold inventory we were seeing in other places.

If you just look at our neighborhoods in Boston, Brookline, Newton, Cambridge, Somerville, and our other local inner suburbs, you realize that there is little opportunity to build vertically (at least for non-uber-high-end housing), and there is virtually no room for sprawl (until you get to the more outlying suburbs). So for property owners, there is built-in value protection over the long run.

So long story short, "normalization" means that there will be less competition for properties (you may even score a great property without any competition!), and less sharp property value inflation. 

Here is the detailed market report for *all* Boston neighborhoods and inner suburbs.

If you have questions about buying or selling Boston real estate, please call me at  617-584-9790, or send me an email at joe.wolvek@gibsonsir.com. 

#BostonRealEstate #BostonHomePrices

Real estate data company LINK reported that themedian price for condos in many downtown Boston neighborhoods rose almost 10 percent in 2015 from the previous year, according to aBostonGlobearticle.

Prices for luxury condosrose at double that rate.

Its almost as though were approaching Manhattan prices, said Debra Taylor Blair, president of LINK. Demand for urban living is high.

Demand is seen as largely driven by empty nesters looking to leave the suburbs, and by international buyers.Higherpriced luxury condominium buildings such as22 Liberty,50 Liberty, the Tishman Speyer Pier 4 condos, and One Dalton are in line to open in the next couple of years. Millennium Tower is scheduled to open later in 2016.LINK president Debra Taylor Blairbelieves that developments such as these aresetting the prices for those that follow.

Read The Boston Globe'sBoston Condo Market Hit New Heights in 2015.

If youhavequestions about buying or selling Boston real estate, please call me at617-584-9790, orsend me an email via the linkbelow.  

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