The Big Question: Will home prices decline?

Despite a recent uptick in inflation, numerous economic forecasts suggest a gradual decline in interest rates throughout 2024. Experts anticipate that by year-end, the average mortgage rate will hover just above 6%, a notable shift considering rates reached as high as 8% not long ago. However, the question remains: will this change impact home values?

Looking at the relationship between interest rates and home sales reveals a common pattern. Typically, lower interest rates lead to increased home sales as borrowing costs decrease, making loans more accessible. However, the dynamic between interest rates and home prices is different. While more buyers entering the market usually results in higher demand and, subsequently, higher prices, 2024 may see a unique scenario due to an expected increase in housing inventory. It may not be a huge increase, but an increase nonetheless.

With 90% of homeowners currently enjoying interest rates below 4%, record-high equity levels, and the prevalent “Lock in Effect,” potential sellers are inclined to stay put. Despite life changes that could necessitate a move, the allure of low-interest rates encourages them to stay in their existing homes. As rates decrease, the gap between their current rate and the market rate narrows, prompting more sellers to list their properties.

The big question: will home prices decline? In our local market, the consensus is no. The substantial pool of potential buyers is anticipated to counterbalance increased demand, leading to modest appreciation or, at the very least, stability in home prices. However, it’s crucial to recognize that the real estate market is dynamic and subject to external influences such as economic policies and global events. If you are hoping to make a change in 2024, staying informed is key. Feel free to reach out at any time to see what exactly is happening in our market.