PROPERTYSPARK ARTICLE

2024 Housing Trends for the First Quarter: Here’s What to Expect

The U.S. housing market was a wild ride last year, with mortgage rates doubling and house sales plummeting. Most would-be buyers and sellers, including home buyers looking for Georgetown TX homes, couldn’t help but watch from the sidelines. This is largely attributed to the increase in interest rates by the Federal Reserve to fight inflation and slow the economy.

Ideally, the first quarter of every year is full of activity and excitement among property buyers and sellers in the real estate market. According to the National Association of Realtors, more than one million homes move during this period, representing almost 20% of home sales activity of the year. However, the current high interest rates have made mortgages expensive for most borrowers.

While mortgages have dropped, they remain comparably high, and steep property prices dissuade would-be buyers. These mortgage rates, coupled with limited housing inventory, are the main reasons behind the slow market experienced in the first quarter of 2024.

Low levels of house inventory mean sellers continue to have the upper hand in the market. Real estate experts agree that activities will be slower this first quarter than the historical average. If rates continue dropping later in 2024, it will spur the market for both buyers and sellers. While buyers might have some leverage, sellers with significant home equity aren’t motivated to sell their homes at the current market prices.

Mortgage Rate Projections for the First Quarter

The mortgage rate will most likely remain high for several months into 2024. However, different financial institutions have varying mortgage projections. For instance, the Mortgage Bankers Association projects that 30-year fixed mortgage rates will average 6.1% by the end of 2024 and 5.5% by the end of 2025. On the other hand, Fannie Mae predicted an average of 7% in the first quarter before slowly declining to Q4 average of 6.5%.

How About Home Prices and Inventory?

With most homeowners locked in low interest rates and unwilling to sell their homes due to the high market prices, the demand for properties will outpace supply for a while. Generally, there won’t be a meaningful increase in housing inventory until mortgage rates stabilize below the 5% range.

Nonetheless, there are positive signs. For instance, home builders’ activity, which had greatly declined, is slowly increasing amid the reduction of mortgage rates and improved building conditions. A recent National Association of Home Builders report shows that home builders’ activity rose to 37% from 34% in December.

First-time homebuyers should postpone or pause their purchase intentions. If you have plans to buy a home during the first quarter, expect a slight increase in property prices. Even if mortgage rates decline gradually in the course of the year, it won’t have much effect on housing affordability.

The limited housing inventory is also a challenge in Q1. Even with an increase in homebuilder activity, a handful of existing homes will be listed for sale. While the demand for homes has significantly declined, supply remains very limited, especially for properties below the $400,000 price range.

Endnote

The real estate market for the first quarter of 2024 isn’t stable, but many believe the remaining year will mirror 2022 as the market stabilizes and rebalances. Real estate players also expect a return to traditional seasonality, with property prices reaching their peak in May and June and a slow decline towards the end of the year.