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BrianAJackson / Getty Images/iStockphotoProspective homebuyers that exited the market in 2023 due to high home prices and mortgage rates may fare better in 2024. A new Realtor.com report predicts that the average mortgage rate in 2024 will be 6.8%, with rates declining over the year to reach 6.5% by the end of the year. In addition, home prices are expected to ease slightly and drop by 1.7%.I’m a Real Estate Agent: Almost No One Can Afford To Buy a Home in These 5 CitiesRead: 3 Things You Must Do When Your Savings Reach $50,000Here’s a look at how soon these declines may occur, and what that means for prospective buyers and sellers alike.I’m a Luxury Real Estate Agent: These Are the 5 Home Features That Turn Buyers AwaySponsored: Open a new checking account and earn early paycheck access; up to 2 days early with Discover® Cashback Debit with Early PayMortgage Rates Are Expected To Drop by Mid-YearIt may take a few months for rates to drop below 7%, but Realtor.com experts believe they will get there.“We expect to see mortgage rates dip to 6.8% by mid-year, probably in the June or July timeframe, with rates approaching 6.5% in late November or December 2024,” said Danielle Hale, chief economist at Realtor.com.While this is good news for buyers overall, the downside is that it could lead to increased competition.“When interest rates have dipped, we have often seen a jump in homebuyer interest,” Hale said. “The market may become more competitive if more households decide to try to buy a home without an increase in the number of sellers.”Lower rates may also have the effect of decreasing buyer confidence.“Another consideration is that if we’re seeing a steep drop in mortgage interest rates, it could mean that the economy is softening more than or faster than expected. This softening could undermine buyer confidence and may offset some of the advantages that we would otherwise see from lower mortgage interest rates,” Hale said.Home Prices Will Ease for the First Time Since 2012“Although unaffordability has worsened significantly over the last few years, it has not yet been enough to offset home price growth, as lower demand continued to outstrip even more limited supply,” Hale said. “We expect to begin to see the tide shift in 2024.”Story continuesUnfortunately, the low supply issue is likely to persist into 2024 — but it isn’t all bad news.“Even though we expect to see fewer existing homes for sale, other types of real estate will start to offer some relief to households looking for a place to call home,” Hale said. “Builders are expected to ramp construction of single-family homes up slightly next year, while we see a growing number of multi-family homes, typically built for rent, shift from under construction to completed and available. A growing number of alternatives will act as a pressure relief valve that will help bring about softer prices in 2024.”However, those looking to sell their homes in 2024 shouldn’t be too concerned about home prices declining.“Even though we expect home prices to decline in 2024, the decline is projected to be incredibly modest nationwide,” Hale said. “Combined with the fact that home prices have risen for the better part of the last 11 years, most sellers can expect to walk away from a transaction with a good amount of realized equity.”Should Buyers Wait To Make a Move?Although mortgage rates and home prices are projected to ease throughout 2024, Hale does not think that prospective buyers should wait around for these shifts if they are serious about buying.“The world can evolve in unexpected ways. For this reason, I wouldn’t advise a prospective buyer to wait on mortgage rates or home price changes,” she said. “Instead, I’d take a more micro focus. If a buyer can find a home that fits their needs and their budget, then it makes sense to move forward. If a buyer can’t find a home without stretching their budget or compromising on must-haves, then that’s likely a sign that it’s better to wait.”Prospective buyers should also consider new construction homes in 2024.“Buyers considering whether it’s the right time for a move would be wise to evaluate a newly built home as part of their option set, as new homes are expected to continue to make up a historically larger share of homes available for sale,” Hale said.More From GOBankingRatesThis article originally appeared on GOBankingRates.com: New Real Estate Forecast Predicts a Drop in Home Prices and Mortgage Rates in 2024: How Low Will They Go?
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