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November 15, 2024

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November 15, 2024

What Should Homebuyers Do Now?

Market Update

Coming Soon

What should homebuyers do now? Mortgage rates remain slightly above 7% this week, according to Mortgage News Daily, for a 30-year fixed prime borrower.

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Looking ahead to 2025, here are some forecasts for mortgage rates:

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- Fannie Mae: 5.7%

- Mortgage Bankers Association (MBA): 5.9%

- National Association of Home Builders: 5.94%

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The mortgage industry has experienced significant changes over the past few decades. In 1993, the total number of home sales was approximately 3.8 million. This year, Altos Research projects the number of home sales to be around 4 million, despite the U.S. population increasing by 85 million—from 260 million to 345 million.

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This disproportionate growth in home sales compared to population growth highlights the significant pent-up demand among homebuyers. If mortgage rates decline to around 6%, a surge in homebuying activity could occur, similar to trends observed just a few weeks ago.

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The biggest issue homebuyers face is overall housing supply. The home-building industry suffered significant setbacks after the 2007 Great Recession, when new home construction declined by nearly 75% from the peak. Las Vegas, in particular, was at the forefront. Builders faced a perfect storm of challenges:

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- Excess inventory of foreclosed homes flooding the market

- Stricter lending standards for both buyers and builders

- High costs of labor and materials

- Lingering economic uncertainty, which kept buyers cautious

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Fast forward to today, and the consequences of this prolonged slowdown are clear. According to the National Association of Realtors (NAR), the U.S. faces a housing shortage of 5.5 million homes.

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For homebuyers, this shortage means ongoing upward pressure on prices for both new and existing homes. Addressing this shortage will take time and require significant coordination. However, challenges like rising interest rates, material costs, and labor shortages continue to hinder progress.

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Timing is critical. Homebuyers who wait for rates to drop may face increased competition from others entering the market. Acting now, even with slightly higher rates, can provide homebuyers with more negotiating power on price and terms.