When you read about the housing market, you’ll probably come across some information about inflation or recent decisions made by the Federal Reserve (the Fed). But how do those two things impact you and your homebuying plans? Here's what you need to know:
One of the Fed’s primary goals is to lower inflation. In order to do that, they started raising the Federal Funds Rate to slow down the economy. Even though this doesn’t directly dictate what happens with mortgage rates, it does have an impact.
Recently inflation has started to cool, a signal those increases worked and are bringing inflation back down. As a result, the Fed’s hikes have gotten smaller and less frequent. In fact, there haven’t been any increases since July (see graph below):
And not only has the Fed decided not to raise the Federal Funds Rate the last three times the committee met, they’ve signaled there may actually be rate cuts coming in 2024. According to the New York Times (NYT):
“Federal Reserve officials left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.”
This indicates the Fed thinks the economy and inflation are improving. Why does that matter to you and your plans to buy a home? It could end up leading to lower mortgage rates and improved affordability.
Mortgage rates are influenced by a wide variety of factors, and inflation and the Fed’s actions (or as has been the case recently, inaction) play a big role. Now that the Fed has paused the increases, it looks more likely mortgage rates will continue their downward trend (see graph below):
Although mortgage rates may remain volatile, their recent trend combined with expert forecasts indicate they could continue to go down in 2024. That would improve affordability for buyers and make it easier for sellers to move since they won’t feel as locked-in to their current, low mortgage rate.
The bottom line is that the Fed’s decisions have an indirect impact on mortgage rates. By not raising the Federal Funds Rate, mortgage rates are likely to continue declining. Let's connect so you have expert advice about changes in the Boston area housing market and how they affect you.
Has your house been sitting on the market a while without selling? If so, you should know that’s pretty unusual, especially right now. That’s because the supply of homes available for sale is still far lower than what we’d see in a normal year. That means buyers have fewer options than they usually would, so your house should be an oasis in an inventory desert.
So, if homebuyers have limited choices and your house still hasn’t sold, there’s a reason why. Let’s break one potential sticking point that may be turning buyers away: your asking price.
Especially with today’s higher mortgage rates already putting a stretch on their budget, buyers are being a bit more sensitive about price. As a recent article from the Wall Street Journal (WSJ) says:
“If you are serious about selling your home now, don’t get greedy with the asking price. This is still a seller’s home market as there simply aren’t enough affordable homes for sale in many parts of the country. But with average 30-year mortgage rates above 6%, buyers are much more price-sensitive than they were a year ago.”
While you want to maximize the return on your investment when you sell your home, you also need to be realistic based on current market conditions. The simple truth is your house is only going to sell for what people are willing to pay right now.
This can be a hard thing to accept. Especially since emotions can run high during the selling process, which only complicates matters more. After all, you may have lived in this house for years, so it’s only natural you’re emotionally tied to it – and those heartstrings can make it harder to be objective.
But it’s important to acknowledge that a bigger-than-expected price tag deters buyers and may make them dismiss your house as a possibility before even seeing it. And if no one’s looking at it, how will it sell?
If you want to get your house sold, you’ll need to do something to spark interest in your home again. That’s where an experienced and skilled local real estate agent comes in. I use data to find out if it’s priced too high for the local market. I balance the value of homes in your neighborhood, current market trends and buyer demand, the condition of your house, and more to find the right price for your house, so you can close this chapter and start your next one.
The bottom line is: while it’s true there aren’t that many homes available for sale right now, your home’s asking price still matters. And, if it’s not selling, it may be priced too high.
Joe
When it comes to what’s happening in the housing market, there’s a lot of confusion going around right now. You may hear one thing in conversation with your friends, see something totally different on the news, and read something on social media that contradicts both of those thoughts. And, if you’re thinking about making a move, that can leave you with a lot of lingering questions. That’s where a trusted local real estate agent comes in.
Here are the top 3 questions people are asking about today’s housing market, and the data to help answer them.
mortgage rates are higher than they’ve been in recent years. And, if you’re looking to buy a home, that impacts how much you can afford. That’s why so many buyers want to know what’s ahead for mortgage rates. The answer to that question is: no one can say for certain, but here’s what we know based on historical trends.
There’s a long-standing relationship between mortgage rates and inflation. Basically, when inflation is high, mortgage rates tend to follow suit. Over the past year, inflation was up, so mortgage rates were as well. But inflation is easing now. And this is why the Federal Reserve has recently paused their federal funds rate hikes, which means many experts believe mortgage rates will begin to come down.
And in some ways, we’ve started to see hints of slightly lower mortgage rates in recent weeks. But it’s certainly been volatile and will likely continue to be that way going into next year. Some ongoing variation is to be expected, but the anticipation is, that in 2024, we’ll see a downward trend. As Aziz Sunderji, Strategist at Home Economics, says:
“The bottom line is that interest rates are likely to be lower-perhaps even lower than many optimists think - in the weeks and months to come.”
While there’s been a lot of concern that prices would come crashing down this year, data shows that didn’t happen. In fact, home prices are rising in most of the nation. Experts say that trend will continue, just at a slower pace that’s much more normal for the housing market – and that’s a good thing.
To help show just how confident experts are in this continued appreciation, take a look at the Home Price Expectation Survey from Pulsenomics. It’s a survey of a national panel of over 100 economists, real estate experts, and investment and market strategists. As the graph below shows, the consensus is, that prices will keep climbing next year, and in the years to come.
While recession talk has been a common thing over the past few years, there’s good news on that front.
The Wall Street Journal (WSJ) polls experts on this topic regularly. And last year at this time, most of them thought a recession would have happened by now. But as experts look at all the leading indicators today, they’re changing their minds and saying a recession is getting less and less likely. The latest results show that more experts now think we’re not headed for another recession (see chart below):
This is big news for the housing market. And while the 48% to 52% split may seem close to half and half, the key thing to focus on is that the majority of these experts think we’ve avoided a recession already.
