Mortgage relief is making its late arrival, according to Realtor.com's National Housing & Economic Forecast 2024 Midyear Update.
Mortgage rates have been revised slightly lower as signals from the economy suggest that it will be appropriate for the Fed to begin to cut its Federal Funds rate in 2024. Realtor.com's yearly mortgage rate average forecast is down to 6.7%, with its year-end forecast revised to 6.3% from 6.5%.
Home price growth has been much stronger than forecast as the U.S. economy remains resilient in the face of a higher rate environment. As a result, the company revised its forecast from a decline of 1.7% to a gain of 4.6% for 2024 as a whole.
Home sales are expected to register only slightly higher than initially forecast, with an increase of 0.8% for 2024, which Realtor.com says would mean a total of 4.1 million home sales for the year, the second-smallest annual total since 2012.
As demand putters along and sellers remain patient, inventory has started to accumulate on the market more than forecasted. As a result, Realtor.com's revised inventory forecast went from a decline of 14% for the year as a whole to a gain of 14.5%.
"During the first half of this year, we have seen home buyers continue to remain sensitive to mortgage rates, and while home sellers are also affected, the binds of the mortgage rate lock-in effect appear to be loosening for some homeowners," said Realtor.com Chief Economist Danielle Hale. "These trends mean that home sales in 2024 will eke out only a small gain over 2023, but homebuyers have a fair amount to look forward to in the latter part of the year."
Other factors impacted the forecast revisions. Inflation, for one, is decreasing but remains above the Fed’s 2% target, leading to a maintained target rate of 5.25%-5.5% through July. However, a rate cut is expected starting in September due to slower job growth and rising unemployment.
Realtor.com's expected Fed rate cuts and a narrowing spread between the 10-year Treasury and 30-year mortgage rates should lower mortgage rates by late 2024 and early 2025.
The upcoming NAR Settlement, effective August 17, 2024, could also impact real estate transactions, potentially affecting commissions and home prices. Adjustments will likely be gradual and dependent on broader market conditions. "[The NAR Settlement] will have ramifications for the real estate industry as homebuyers, home sellers, and industry professionals figure out how to adjust to new ways of doing business. There has been speculation about how this will affect commissions and house prices," Realtor.com's forecast read.
