US Housing Market to Remain C 12/01 07:39
LOS ANGELES (AP) -- Several housing economists are projecting that mortgage
rates will ease moderately next year, though the forecasts call for the average
rate on a 30-year home loan to remain above 6%.
While lower rates could help bring more buyers off the sidelines, the
projected declines are unlikely to encourage homeowners who locked in
rock-bottom rates two years ago to sell. That sets the stage for the housing
market to remain constrained by a low supply of homes on the market, even if
rates decline, economists say.
"The costs are going to remain high and we're going to see a lot of people
just choose to sit out," said Danielle Hale, chief economist at Realtor.com.
Hale's forecast calls for the rate on a 30-year mortgage to average 6.8% in
2024, then slip down to 6.5% by the end of the year. At First American
Financial, chief economist Mark Fleming predicts the average rate will range
between 6.5% and 7.5%.
The National Association of Realtors' latest forecast calls for the rate on
a 30-year home loan to average between 6% and 7% by the start of next year's
spring homebuying season.
Forecasts from other housing economists also put the average rate somewhere
in the 6% range in 2024. That's still about double what the average rate was
just two years ago.
Any decline in home loan borrowing costs would be welcomed by homebuyers
that just five weeks ago were facing an average rate of 7.79%, the highest in
over 20 years. The average rate fell to 7.22% this week, the lowest in 10
weeks, mortgage buyer Freddie Mac said Thursday.
As mortgage rates climb they can add hundreds of dollars a month to
borrowers' costs, limiting what they can afford in a market that's already out
of reach for many Americans. Even a modest decline in rates will help lower the
cost of a home loan, improving affordability.
A bigger hurdle is the dearth of homes on the market, which has helped prop
up home prices even as sales of previously occupied U.S. homes fell 20.2%
through the first 10 months of the year.
A modest pullback in rates next year won't spur homeowners to sell,
especially if they are reluctant to take on a mortgage with a higher rate.
Consider, nearly 90% of homeowners with a mortgage had a rate of 6% or below as
of the second quarter.
"This disincentive to sell is likely to persist as long as mortgage rates
remain elevated," Fleming wrote in his 2024 housing market outlook.