Catherine Rusoff
So far, it’s been a tough year for homebuyers, who face the double whammy of high home prices and rising loan rates. Unfortunately, the remainder of 2024 may not offer much relief, at least according to economists at mortgage buyer Freddie Mac.
“[W]We expect mortgage rates to remain elevated through most of 2024,” Freddie Mac said in a Thursday housing forecast. report. “These high interest rates will lead potential buyers to readjust their housing expectations, but we anticipate housing demand will remain high due to favorable demographics, particularly in the starter home segment.”
Rates on a 30-year fixed mortgage are above 7%, near their highest point in more than 20 years. With inflation remaining stubbornly highThe Federal Reserve is expected to delay cutting its benchmark rate, and Freddie Mac has said it is anticipating the central bank will make just one cut in 2024 – with that occurring later in the year.
The Federal Reserve has said it prefers to keep rates high until inflation cools to around 2% on an annual basis, rather than risk cutting too soon and fueling another round of price spikes. But as a result, borrowers were faced with higher borrowing costs for everything from credit cards to mortgages.
It wasn’t just mortgage rates that made buying homes this spring a difficult proposition for many Americans, especially those in the lower- and middle-income brackets. Tight inventories and rising home prices are pushing some buyers out of the market, with the average U.S. home sale price hitting a record high of $383,725, according to Redfin.
The cost of owning a home has grown so much that it is now necessary a six-figure income to afford a typical U.S. home, according to Zillow. For the first time in about two years, home prices did not fall in any of the country’s largest metro areas in April, Redfin said in a separate statement. report.
Higher mortgage rates have also impacted some current homeowners. Because many purchased or refinanced their properties in the early years of the pandemic – when rates fell below 3% – some are wary of selling their properties if it means taking on a new mortgage at current rates.
Hesitant sellers, combined with new construction failing to keep up with housing demand, have created a nationwide shortage of existing and new homes for sale, economists said.
“Overall, tight inventories and higher (mortgage) rates for longer are still major barriers to home sales volumes,” Freddie Mac said. “Mortgage rates above 7% continue to hurt many potential buyers and sellers have less incentive to sell.”
