Will Homes Be More Affordable in 2024?
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How did mortgage rates and inventory affect the 2023 housing market?
Here's your Money Briefing for Thursday, December 28th. I'm J.R. Whelan for The Wall Street Journal. Many Americans who plan to buy a home in 2023 are still on the sidelines. Mortgage rates that flirted with 8% as well as low inventory practically ground the housing market to a halt, stifling the plans of buyers and sellers. And while rates have ticked lower, will that be enough to energize the housing market in 2024?
If rates do come down, that might free up some inventory that maybe sellers will say, well, I wasn't going to give up my 3% rate for an 8% rate, but it could also bring more buyers to the market. So it might still not feel like there's enough inventory to go around.
And that could leave renters who want to buy on the outside looking in.
That can mean, you know, adding roommates, moving back in with family, or simply postponing plans to get an apartment of your own in the first place. That especially affects younger people who do make up a large portion of the renter population.
We'll talk to housing reporters Nicole Friedman and Will Parker after the break.
What can homebuyers and sellers expect in 2024? Wall Street Journal housing reporter Nicole Friedman joins me. So, Nicole, why is the housing market so important to the overall economy?
Why does the housing market matter to the broader economy?
The cost of housing for most people is their biggest expense. And so housing affordability has a huge effect on consumer sentiment and consumer spending. And then in terms of home sales, home purchases lead to a lot of other spending. People who buy homes, then they buy large appliances, or they hire painters, or they hire moving companies. And so there's a lot of additional spending that comes from every home purchase. And the other thing is there is a connection between the housing market and the job market that if it's affordable for people to move, if it's easy for people to move, they might be more likely to relocate for a better job opportunity. And conversely, if housing is really expensive, if it's difficult to move, they might not take that opportunity if it requires relocating.
One factor that has ground many areas of the housing market to a crawl in 2023 is interest rates. We saw them approach 8% this year. What can homebuyers expect in 2024?
Mortgage rates have been a huge issue for homebuyers this year. It's really made affordability in the housing market just the worst in decades. And it's pushed a lot of buyers out of the market. There are a lot of people who are sidelined and kind of waiting to see if rates go down or if prices go down. And in terms of forecasts for next year, you know, economists are mixed on where interest rates, mortgage rates are going. A lot of it depends on the broader economic forecast, if the economy is going to have a soft landing or enter a recession. But definitely nobody expects mortgage rates to go back to the very low levels around 3% or even below 3% that they were during 2021.
Anybody who shopped for a house in 2023 knows how difficult it was just to find available homes to choose from. Why have inventory levels been so low?
Mortgage rates have been so high. And so existing homeowners, either they bought their homes when rates were much lower or they refinanced when rates were much lower. And so a lot of people have current mortgage rates at 3%. three and a half, maybe even below 3%. And so they're really unwilling to move right now because they look at the cost of buying a different home and giving up their current low mortgage rate and taking on a new loan at a much higher rate. And it just doesn't pencil out for them.
How have high mortgage rates sidelined potential homebuyers?
They say, even if this home isn't the right home for me, unless I absolutely have to move, it just doesn't make sense right now. And so homeowners are just staying put. And so that means there's not a it's hard for people to find a house that is a good fit for them right now.
Will that piece of the equation change in 2024?
So that really depends on what happens with mortgage rates. If rates do come down, that might free up some inventory that maybe sellers will say, well, I wasn't going to give up my 3% rate for an 8% rate, but if it's come down to 6% and I really need to move, maybe that difference in cost is more worth it.
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Chapters
5 chapters
1
How did mortgage rates and inventory affect the 2023 housing market?
0:03–1:44
2
Why does the housing market matter to the broader economy?
1:44–4:04
3
How have high mortgage rates sidelined potential homebuyers?
4:04–7:43
4
Why have inventory levels remained unusually low and could that change in 2024?
7:43–9:14
5
What do experts predict for home sales and regional market shifts in 2024?
9:14–10:23
Speakers
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