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3 Signs the Housing Market Is Bouncing Back
By Leslie Cook MONEY RESEARCH COLLECTIVE
The housing market may have ground to a halt this year, but we’re poised for an upswing in 2024. Here are three reasons why.
The housing market is ready for a rebound in 2024, and experts are growing more and more confident that the clouds are finally parting.
Falling mortgage rates are one promising indicator. After steadily increasing over the summer, Freddie Mac’s benchmark rate for a 30-year fixed-rate loan topped out at 7.79% in October. Since then, rates have tumbled, and are creeping towards 6% for the first time in almost a year.
There are also signs that rates will keep declining into next year: Wages have increased, the labor market has cooled and inflation may have finally steadied enough to allow the Federal Reserve to start cutting interest rates.
Taken together, these trends “[make] it more likely than not that mortgage rates have peaked,” said Chen Zhao, economic research lead at Redfin, in a recent report.
The housing market may have ground to a halt this year, but we’re poised for an upswing in 2024. Here are three reasons why.
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View RatesAffordability is improving
Home affordability got clobbered this year. According to Redfin, only 16% of the homes for sale in the U.S. in 2023 were considered affordable (i.e., they had a monthly mortgage payment that amounted to no more than 30% of their area’s median income). That’s the lowest share on record since Redfin started tracking the data ten years ago.
Now, falling rates are luring buyers back. At the October peak of 7.79%, the typical monthly payment on a $400,000 mortgage (excluding taxes, insurance, HOA fees and other costs) was about $2,877. At the current 6.61% rate, the average mortgage payment is about $2,557 — a savings of $320 per month.
New listings are picking up
Lower interest rates are bringing sellers back, too. According to Redfin’s report, new listings are up 9% year-over-year, the largest annual increase since July 2021, when the pandemic buying frenzy was in full force.
This trend will likely accelerate as homeowners who bought a home during that period feel less trapped or locked into their 3% to 4% rate. People who bought a house more recently — that is, buyers who didn’t win the interest rate lottery — will be even more willing to part with their property.
Mortgage applications are rebounding
The number of mortgage applications homebuyers filed with lenders hit a 28-year low in October, according to the Mortgage Bankers Association (MBA). As rates have started falling, those filings have slowly ticked higher.
The pace of those applications is still pretty sluggish — the MBA says people are filing 18% fewer applications than they did in 2022 — but would-be homebuyers are getting antsy, and experts are cautiously optimistic that we’ll see a swift turnaround come spring.
“Buyers are excited about falling rates,” said Shoshana Godwin, a Redfin agent based in Seattle, Washington, in the press release. “They’re raring to go.”
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Leslie Cook is Money's lead real estate editor, covering news stories about mortgages and how rate movements affect the housing market and writing and editing stories that inform our readers about real estate trends and how they affect homebuyers and sellers. Leslie writes a weekly newsletter, Money Moves, that covers a wide range of real estate topics in addition to her weekly articles. Her work has been featured on Apple News, MSN and ConsumersAdvocate.org. Leslie has been covering the mortgage and real estate industry at Money since 2019 and has interviewed industry leaders, such as Lawrence Yun, chief economist at the National Association of Realtors, and Glenn Kelman, CEO of brokerage Redfin. She has been a guest on the This Morning with Gordon Deal radio show, interviewed by The Mortgage Note, and served as moderator for ServiceLink’s State of Homebuying webinar. While at Money, Leslie has contributed to several of Money’s rating and ranking features, including Best Places to Live, Best Places to Travel and Changemakers. She has also played a major role in researching and selecting Money’s Best Banks rankings for the past four years. Before joining Money as a staff writer, Leslie was a reporter for Caribbean Business Newspaper in San Juan, Puerto Rico, covering human resources, telecommunications and computers. She graduated cum laude from Bryn Mawr College in Pennsylvania with a bachelor’s degree in history. The research and interviewing skills learned there have contributed to Leslie’s ability to provide accurate information on her area of expertise and elicit informative responses from her interviewees.