In 2024, the housing market is witnessing a notable shift, fueled by declining mortgage rates, which are set to rejuvenate home sales and open up new refinancing opportunities. Fannie Mae's latest forecast paints a picture of gradual recovery, departing from the turbulent market conditions of the pandemic era.
This year, we're expecting a significant drop in 30-year fixed-rate mortgages, potentially falling below 6%. This decrease is anticipated to inspire homeowners to list their properties, potentially increasing home sales by 4% and continuing this upward trend with a 13% rise in 2025. Additionally, refinancing volumes might see an impressive surge, offering relief to the strained mortgage lending sector.
The turning tide in inflation rates and the Federal Reserve's inclination towards future rate cuts have injected optimism into the market. Home sales and mortgage originations, which hit a low in late 2023, are now on the path to recovery. This optimism is further bolstered by Fannie Mae's revised stance on the likelihood of a recession, now viewing it as a diminished risk for 2024.
Interestingly, mortgage rates have already started to reflect these changes, with predictions now suggesting they could fall to an average of 5.8% by the end of this year, and even further to 5.5% by the end of 2025. These forecasts align closely with the Mortgage Bankers Association's predictions.
However, despite these positive signs, challenges still loom. The market for existing homes is expected to grow, but at a relatively modest pace. Affordability issues and supply constraints continue to be significant hurdles. Furthermore, not all homeowners will benefit equally from the lower rates, especially those who secured mortgages at even lower rates during the pandemic.
In terms of home prices, there's an expected cooling in annual price appreciation. While there was a notable increase in late 2023, forecasts for 2024 and beyond suggest a gradual decline in this growth, with predictions of nearly flat appreciation by the end of 2025. This shift in home prices, coupled with potentially cooler rental markets, might sway some prospective buyers towards renting.
Looking at mortgage and refinancing volumes, there's an expectation of substantial growth. The refinancing volume is projected to nearly double in 2024, offering a much-needed boost to lenders. Purchase loan originations are also set to increase significantly, reflecting the anticipated rise in home sales.
This comprehensive analysis, crafted by Fannie Mae’s Economic and Strategic Research Group, provides a multi-faceted view of the market. It's a blend of expert insights from economists and analysts, offering a detailed and nuanced perspective on what 2024 holds for the housing market.
As we move forward, these predictions offer a beacon of hope and opportunity, signaling a potential shift towards a more stable and accessible housing market. Whether you're a homeowner looking to sell, a buyer on the hunt for a new home, or a participant in the mortgage lending industry, 2024 appears to be a year of significant potential and gradual progression towards a market recovery.
Citation of source: Carter, M. (2024, January 18). Falling Mortgage Rates Should Boost 2024 Home Sales: Fannie Mae. Inman. Retrieved from https://www.inman.com/2024/01/18/falling-mortgage-rates-should-boost-home-sales-fannie-mae