The percentage of home buyers dropped from 34% to 26% as more and more people opt to rent instead of buy, according to the National Association of Realtors Research Group ’s 2023 report. Last year saw record-high housing prices and an unprecedented surge in interest rates, resulting in a sharp decline in the number of first-time home buyers.

Purchasing a house of one’s own is still an American dream that millions across the country are working relentlessly to achieve. For most people, it takes a few years of planning and saving up to be able to afford a house.

However, with the market being immensely volatile in 2023, many have been forced to put a pause on their dreams. Now, the only question potential homeowners are left asking is whether 2024 will bring any better news or if they should prepare for more challenging times ahead.

Falling Mortgage Rates Offer Hope

As of last December, the average contract rate on a 30-year fixed-rate mortgage decreased from 7.03% to 6.95%, according to a Freddie Mac survey. This marks the first time since August that mortgage rates fell below 7%. That’s encouraging news for those looking to finance their dream home this year.

The Federal Reserve recently announced its plans to leave interest rates unchanged. This decision may pause the incessant increase of interest rates and offer buyers a period of respite. While affordability is still a question for many, the dip in mortgage rates is a positive sign for those planning on purchasing a house this year.

Low Housing Inventory Restricts Options

The unpredictability of the market has been difficult, not only for buyers but also for sellers. Homeowners refuse to sell their existing homes; locked into mortgage rates under 2-3% during the low-rate refinancing boom 2020-2021. Selling now would cost them the low rate and presumably force them to take out a new mortgage for their next home at a  significantly higher interest rate.

This led to a drop in inventory, making it harder for buyers, especially those on a budget, to find suitable homes. There is, however, a ray of hope, as there has been a modest rise in single-family construction permits. This resulted in an improvement in the inventory levels across more than 95% of major markets over recent months. In such a market, it is best to cast a wider net and be flexible with one’s expectations.

No Prediction of a Housing Market Crash

2023 saw a record rise in housing prices, disappointing many potential buyers and forcing them to opt for renting instead. This gave way to speculations of a market crash in 2024, like the one in 2008. Yet, experts are not too worried about history repeating itself, as the present financial scenario is entirely different from what it was two decades ago. 

Keith Gumbinger, the vice president of HSH.com, says that sellers could sell a home bought for $300,000 three years ago for $500,000 even a year ago. But in the present market, it would bring only $400,000. However, this does not spell a housing crash and still lies within the market’s expected range of ups and downs. 

In this situation, being a buyer is only slightly more profitable than being a seller. Buyers waiting for a market crash to buy a house might be disappointed.

Housing Prices Continue To Rise

With the speculations of a market crash, there were rumors of a sharp dip in house prices in the coming year. But, according to experts, the cost of homes will continue to rise this year. Zillow predicts that home values will increase by 3.7% in 2024.

Multiple factors can influence this increase; rising construction costs and a slow economy due to prolonged high-interest rates are likely contributors. If one plans to invest in a house, this may be as good a time as any to do so, considering there doesn’t seem to be much chance of prices falling in the near future.

Homebuyers in the U.S. witnessed a sharp and steady increase in costs and interest rates. Over the past 10 years, the average price of a house increased by 48.55%, making it harder to own a home. While 2023 saw record-high prices and mortgage rates, 2024 may still offer an optimistic spin on the market. However, it is best to set realistic expectations for the future.

This article was produced by Media Decision and syndicated by Wealth of Geeks.