With the new year upon us, potential buyers will be on the lookout for, hopefully, a decline in prices and an uptick in the supply of homes for sale on the market. Also, on the radar will be how the U.S. economy fares, will the inflation rate continue to decline, and how the job market plays out.
A recent report out of Redfin says that home prices were up 0.6% from October, the smallest monthly increase since June, and were up 6.4% from a year earlier. Redfin also said that indicators have suggested a re-invigoration of buyer and seller participation in the housing market.
After bottoming out at a 2.6-month supply of homes on the market in February and March of this year, supply has increased to 3.5 months where normal levels are seen at six months. From a supply perspective, we don’t want to see a huge drop in borrowing costs because that could trigger big demand for housing, further deteriorating supply.
The U.S. economy saw a frothy 5% increase in Gross Domestic Product in Q3 2023 with the St. Louis Fed’s NowCast (GDP forecast) at 1.6% in Q4. The Congressional Budget Office (CBO) sees the U.S. to slow to 1.5% in 2024 while the Federal Reserve is forecasting 1.4% GDP growth next year. Lower growth could usher in lower rates.
The rate of inflation has eased in 2023 from the 40-year highs witnessed in 2022. If inflation can continue to ease, it will be a positive for the housing market. The last metric to watch is the job market. When consumers feel stable in their jobs and able to move to another position with somewhat ease, that is also a positive for housing.
All the above are key points when making the big decision to jump into the pool of the American Dream of home ownership. Once in, the water is fantastic given the positives of … financial stability, financial strength, tax deductions, a permanent home, and a sense of belonging in your community.
Source: Mortgage Market Guide
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