Mortgage relief is finally on the way, according to the Realtor.com 2024 Forecast Update. The average contract rate on a 30-year fixed-rate mortgage (the most popular U.S. home loan) dropped 27 basis points in the week ended Aug. 2, to 6.55%. That was the lowest rate since May 2023, and the sharpest drop in two years. Last month, the Federal Reserve signaled that cooling price pressures and a slowing labor market mean a policy rate cut could be on the table as soon as September.
Therefore, Realtor.com forecast for mortgage rates has been revised slightly lower. Its yearly mortgage rate average forecast is slightly lower at 6.7%, and the company has revised its year-end forecast to 6.3% from 6.5%.
“During the first half of this year, we have seen home buyers continue to remain sensitive to mortgage rates, and while home sellers are also affected, the binds of the mortgage rate lock-in effect appear to be loosening for some homeowners,” said Realtor.com Chief Economist Danielle Hale.
“These trends mean that home sales in 2024 will eke out only a small gain over 2023, but homebuyers have a fair amount to look forward to in the latter part of the year. Mortgage rates have finally begun to ease, and this trend is expected to continue as improving inflation enables the Fed to relax its tight policy, boosting homebuyer purchasing power. Furthermore, gains in the number of homes for sale mean that buyers have more negotiating power than they have had in recent years which should help buyers and sellers find the middle ground necessary for more sales. Fall has historically been a shoulder season for the housing market that benefits flexible buyers, and this year is setting up to be even more advantageous” she added.
Mortgage Lock-In Effect is Easing Aiding Inventory Woes
One of the factors that has hampered home sales – an under-supply of homes for sale – has finally started to ease, according to Realtor.com. “We have seen substantial improvement in inventory in the first half of 2024, climbing by more than 35% on a year-over-year basis. This is in stark contrast to our initial 2024 forecast that inventory would be down by 14%. Our revised estimate – the largest adjustment in our forecast – is now that inventory will be up 14.5%. Our revision reflects two somewhat unanticipated market developments this spring. First, some sellers who postponed their decision to sell last year – hoping that mortgage rates would be lower this spring were spurred to action by the better-than-expected mortgage rates at the start of 2024. Second, sellers who have put their home on the market seem willing to wait for a buyer rather than delisting, leading to longer time on market and inventory accumulating at a higher rate than expected.”
The NAR Settlement and Election are Wildcards, But Housing Policy May Not Be So Wild
Looking ahead, two major events are noteworthy, though their impact on the housing market could vary. The impact of the NAR commission settlements on the market and home prices are a wildcard and will depend equally on macroeconomic conditions and industry and consumer adaptations, with any changes likely to occur gradually over time. At the same time, we don’t expect the wildcard election year to be that wild on the economy or housing market in 2024 since both the Republican and Democratic candidates have served in the White House recently. Markets should be able to handle whomever is elected, though acknowledging that the closer the race, the tougher it is to predict the outcome, which can spark volatility, Realtor.com concluded.
