Thinking About Buying a Home? Ask Yourself These Questions
If you’re contemplating the purchase of a home in the current year, chances are you’re closely monitoring the housing market and seeking information from diverse sources such as news outlets, social media, your real estate agent, discussions with friends and family, and more. Home prices and mortgage rates are likely dominating these conversations.
As you navigate this decision-making process, it’s crucial to pose two key questions to yourself. This includes considering relevant data that can help sift through the abundance of information and provide clarity amidst the noise.
1. Where Do I Think Home Prices Are Heading?
A dependable source for insights into home price projections is the Home Price Expectations Survey conducted by Fannie Mae. This survey gathers input from a diverse panel consisting of over one hundred economists, real estate professionals, and experts in investment and market strategy.
Based on the latest findings, these experts foresee a sustained upward trajectory in home prices, with projections extending at least until the year 2028.
(see the graph below):
So, why is this relevant to you? While the percentage of appreciation might not reach the heights observed in recent years, the crucial point to emphasize is that the survey indicates a continued upward trend in home prices for the next five years, rather than a decline.
The positive aspect of home prices increasing, even at a more moderate pace, extends beyond the market itself – it’s advantageous for you as well. Purchasing a home now suggests that its value is likely to appreciate, leading to the accumulation of home equity in the coming years. Conversely, if you postpone your decision, in accordance with these predictions, the cost of the home is expected to rise significantly later on.
2. Where Do I Think Mortgage Rates Are Heading?
Over the last year, mortgage rates experienced an increase due to economic uncertainties and inflationary pressures. However, there’s a positive development on the horizon for both the market and mortgage rates. The moderation of inflation is a significant indicator, particularly for those considering home purchases.
A decline in inflation typically results in a corresponding drop in mortgage rates, a trend observed in recent weeks. Furthermore, with the Federal Reserve indicating a pause in Federal Funds Rate increases and the possibility of rate cuts in 2024, experts are increasingly optimistic about the prospect of mortgage rates decreasing further.
Danielle Hale, Chief Economist at Realtor.com, explains:
“. . . mortgage rates will continue to ease in 2024 as inflation improves and Fed rate cuts get closer. . . . a key factor in starting to provide affordability relief to homebuyers.”
As an article from the National Association of Realtors (NAR) says:
“Mortgage rates likely have peaked and are now falling from their recent high of nearly 8%. . . . This likely will improve housing affordability and entice more home buyers to return to the market . . .”
No one can say with absolute certainty where mortgage rates will go from here. But the recent decline and the latest decision from the Federal Reserve to stop their rate increases, signals there’s hope on the horizon. While we may see some volatility here and there, affordability should improve as rates continue to ease.
Bottom Line
If the prospect of purchasing a home is on your mind, it’s crucial to be aware of the anticipated trends in home prices and mortgage rates. While predicting their exact trajectory is challenging, staying well-informed with the latest information is key to making a prudent decision. Let’s engage in a conversation so that you can stay current on the developments and understand why this is advantageous news for you.
