The US mortgage market is feeling the squeeze as rates climb to levels not seen since July, presenting challenges for potential homebuyers. According to Freddie Mac, the average rate for a 30-year fixed mortgage rose to 6.85% this week, up from 6.72% last week. With these rising costs, many buyers are still pushing forward; contracts to buy homes increased by 4.1% year-over-year, as reported by Redfin.
Despite the increasing financial pressures, the housing market is showing some resilience. Recent government data indicates new home sales rose in November, coinciding with the highest inventory levels since 2007. Sam Khater, Freddie Mac’s chief economist, noted, "While a slight improvement in new and existing home sales is encouraging, the market remains plagued by an overwhelming undersupply of homes." He expressed optimism for the upcoming year, anticipating economic improvements could stimulate purchase activity.
With the Federal Reserve's recent pattern of cutting interest rates, expectations are also shifting. Economists predict more cuts could come by 2025, especially as underlying inflation shows signs of easing, having only climbed 0.1% from the previous month—the slowest gain since May.
Hannah Jones, senior economic research analyst at Realtor.com, indicated potential trends for next year, stating, "On the plus side, we expect mortgage rates to ease and housing inventory to grow next year as builder activity and the weakening lock-in effect bring more homes to the market." Yet, she cautioned, reduced home supply would likely keep prices high.
Looking more closely at local markets, the Denver area realtors initially anticipated interest rates would drop at the start of 2024. While rates remained stubbornly high, the rise of inventory did not translate to lower home prices. By November, the median price for a single-family home was $650,000—up 2% from the previous year. Amy Terry with The Agency remarked, "No one knows for sure what will happen with rates, but we may never see interest rates at 3-4% again," encapsulating the uncertainty felt by many within the real estate sector.
Denver's slower market this year, with 39,153 properties closed through November, has imparted valuable lessons for realtors. Stacie Staub, CEO of West+Main, shared her insights: "One of the biggest lessons this year was our market was predictably unpredictable. Just when we thought we had it figured out, it would pivot again." Realtors learned to prioritize proper pricing and to set realistic seller expectations. Many sellers are now recognizing they should not expect quick turnaround times on listings, with almost half selling for less than the asking price.
Craig Harcek, from 8z, emphasizes the importance of first impressions and home readiness, stating, "If you were going to live here for another five years, what would you want to replace or improve?" He guided sellers to conduct necessary repairs and stage their homes effectively to attract buyers.
Meanwhile, it’s just as important for buyers to focus on what actually matters—namely their personal goals and circumstances. Harcek urges clients not to become too fixated on fluctuated interest rates; rather, they should determine what features they genuinely need and want. He cautioned, "Many of them are scared of making a decision and then regretting it." Buyers should also be aware of the potential risks tied to speculation, a sentiment echoed by Terry, who stated, "For more than a year, we’ve been hearing people say, ‘date the rate and marry the house.’ That’s a risky premise." Buyers might be lured by the prospect of future refinancing but need to focus on whether they can afford current rates comfortably.
Overall, as 2024 approaches, the housing market continues to navigate various economic signals. While mortgage rates and housing trends remain challenging, experts suggest there may be hope for improvement, particularly as more inventory enters the market. The need for buyers and sellers alike to remain adaptable and informed grows ever more apparent within this fluid environment.
