Credit Sesame discusses the possibility of mortgage rates and home prices stabilizing in late 2024.
Mortgage rates have experienced unpredictable ups and downs in recent years, much like a roller coaster ride. Meanwhile, housing prices have shot up rapidly, more like a rocket launcher, increasing significantly in a short span of time.
Elevated mortgage rates and fast-rising home prices have caused many would-be home buyers to delay their dream of owning a home. So far, waiting for conditions to improve has been frustrating. Waiting for better mortgage rates and lower home prices may be futile. However, recently, rates and prices have shown signs of stabilizing somewhat. Mortgage rates and home prices stabilizing at least gives home buyers a sense of what they’re dealing with and firm financial goals to shoot for.
Mortgage rates have leveled off
Throughout late spring and summer of 2024, 30-year mortgage rates fell by 1.14%. At 6.08%, they seemed on the verge of dropping below the 6% mark for the first time in two years. This fall in rates gave people a reason to hope that buying a home was becoming more affordable.
Then mortgage rates reversed course. From the start of October 2024, rates rose by 0.71% over six straight weeks. Suddenly, they were heading back to above 7% instead of falling below 6%.
However, November 2024 brought an unusually calm stretch for mortgage rates. During the month, 30-year rates alternated rising and falling weeks and changed by less than 0.10%. This doesn’t represent the return to lower rates that home buyers might hope for, but at least they remained reasonably stable.
Are home prices stabilizing?
Mortgage rates aren’t the only challenge home buyers have faced in recent years. Home prices have risen steadily over the past decade, and the pace has accelerated in recent years.
From mid-2020 to mid-2024, the average US home price rose by 48%. This, combined with the sharp rise in mortgage rates, made affording a home much more difficult than it had been just a few years earlier. Worse, with prices rising so rapidly, it seemed impossible for many buyers to save or earn enough to afford a home before prices increased again.
However, home prices have fallen in the two most recent months. The total decline is less than a quarter of one percent—hardly enough to offset the increases of recent years. However, even a pause in the rapid rise of home prices is cautiously good news.
Waiting for rate and price reductions may be in vain
In a dream scenario, would-be home buyers would love to set the calendar back a few years to when mortgage rates and home prices were a lot lower than now. However, waiting for a return of those conditions looks pretty unrealistic.
Mortgage rates fell when it looked like inflation was making steady downward progress towards the Federal Reserve’s goal of 2% a year. Recently, though, that progress has stalled. The year-over-year inflation rate increased slightly in October 2024.
Worse, there is growing concern that new tariffs will fuel inflation even further in 2025. Mortgage rates are very sensitive to inflation. It remains to be seen whether tariffs will push inflation and mortgage rates much higher, but at the very least, they seem likely to make it harder for them to fall.
Knowing what to work towards
Home buyers may not get much of a break from rising home prices or mortgage rates, but they appear to have stabilized recently. Mortgages and home prices stabilizing is helpful when trying to achieve any financial goal.
The relative stability in home prices and mortgage rates gives people a firmer idea of what it will take to afford a house. It may take a little longer at today’s levels than people had hoped. However, more stable prices and mortgage rates at least lets them know what to shoot for.
Improving your own position
Buying a home may take a little longer, but There are things you can actively do to put yourself in a better position to afford a home:
- Save toward a bigger down payment. A bigger downpayment means you need to borrow less, which can qualify you for a better mortgage rate.
- Work on your credit score. Raising your credit score is another way to qualify for a better mortgage rate. Over the length of a mortgage loan, anything you can shave off the mortgage rate can add up to a substantial amount of money.
- Know your target market. Monitor real estate prices in the areas where you’d consider buying. This will help you identify neighborhoods that represent better values and allow you to spot a true bargain when it comes along.
Get ready to be opportunistic
Building savings, improving your credit, and staying informed about the market will better position you to take advantage of opportunities when they arise. Being prepared is key because home prices and mortgage rates can change unexpectedly. It’s impossible to predict exactly where these rates and prices will go, but planning with today’s reality in mind allows you to adapt as conditions evolve. The relative stability observed in recent months offers a clearer path forward, making it easier to navigate the uncertainty.
If you enjoyed Are mortgage rates and home prices stabilizing? you may like,
Get free credit monitoring
Read the full article here
