INDIANAPOLIS (WISH) — In 2024, interest rates will once again drive the housing market.
Dan Brown is a real estate agent with FC Tucker and joined Daybreak for our monthly real estate rundown. He discussed the latest data from the January Housing Market Report.
Brown said mortgage rates continue to drive this market. Brown said interest rates will peak in October 2023, decline during the holidays, and then plateau in the mid-to-high 6% range.
“Normally, January is the worst month from all statistical standpoints. It's January, so prices are down, everything is down. What's different about January this year is that it's not. In fact, prices have gone up a little bit. Inventory is still an issue, but this market has been driven by interest rate changes for the past year and a half, and continues to be. The good news is that interest rates have declined. “And while it did hit some level in January, it's still down significantly from its peak in October,” Brown said.
The National Association of Realtors' Home Affordability Index, which measures how much a typical household can afford the monthly mortgage payment for a typical home, shows that mortgage rates have reached their highest levels. It rose from a low of 91 in October to nearly 102 in December 2023. The real estate brokerage group said it was 8%, the highest in 20 years.
Inventory shortages were forcing buyers to compete for what was available, driving up prices in the process.
“Buyers are sellers. When they buy a home, they have to sell the home. And that means waiving interest. One of the statistics we talk about is the market for mortgages. Half of them are below 4%. So when it's 8%, there's not much incentive, but as that goes down, more people will start to enter the market. They'll start looking for a home, We're also selling the house, which frees up the house for the next person. So it's a little hard to get inventory right now. It's about 1/4 of what we want to see. That's a big deal. “It's not great, but it's better than last year,” Brown said.
Compared to January 2023, the average home sales price in 16 central Indiana counties increased 6.6% compared to 2023 to $326,978, according to a report from FC Tucker. The report also states that pending home sales are down, down 4.8% compared to this time last year.
“As we head into the spring market, I think most real estate agents believe it will be a very busy spring as interest rates continue to fall. They won't go down anytime soon. So I don't think so, I hope not. But you can expect, and all the forecasts are pointing to, that interest rates will go down over the summer. And that's good news for everyone. This allows sellers to still receive a large amount of home equity. Buyers need to plan. It's going to be a competitive market. Lots of people have been waiting. Last fall, When interest rates got to unaffordable levels, a lot of people exited the market. So they're now going back in again. So you're going to see a lot of activity,” Brown said. “Buyers should work with their real estate agent and lender and plan carefully. Be prepared. Know what you're looking for, have your finances in place, and have a plan.”
The key to lowering interest rates further is whether the Federal Reserve, which has been raising interest rates to combat inflation, will lower them.
