As soon as the Fed started raising rates, I expected to see a housing market correction.
Luckily, this never happened.
I believe asset managers like BlackRock—who have been buying up the housing supply— have buoyed housing demand and stabilized prices. This has also caused average rental rates across America to skyrocket.
December was the worst year for home sales since 1995, but according to a January 18th report from Fannie Mae, the situation is improving. The report from the Fannie Mae Economic and Strategic Research Group stated:
“The housing market is expected to begin a gradual return to a more normal balance in 2024, following years of significant oscillations in mortgage rates and divergences of key housing market measures from their historical, pre-pandemic relationships.”
I’ve been curious about the mortgage market, so I spoke with a well-known Atlanta-based mortgage specialist, Mike Rishel, about the market.
Here is an edited Q&A:
Chad: How is the mortgage market right now? With rates going from historic lows—the 15-year mortgage rate was at 2.19 percent, and the 30-year rate was at 2.73 percent in February of 2021—to very high rates, the situation seems dire.
Mike Rishel: We are excited because rates have come down enough in the past two months to stir up the business. I have more pre-qualified buyers from applications taken in the past two months than in the previous six months.
Chad: Are mortgages becoming more affordable or more expensive?
Mike Rishel: This question is all about how you view it. In the past couple of months, because of the rate drops, mortgages have become more affordable than in the previous six months, but they are still more expensive than in all of 2022.
Chad: Has Biden been a positive or a negative for the mortgage market?
Mike Rishel: Taking rates from 2% for well-qualified buyers at the beginning of 2022, to as high as 7 plus percent in 2023 does not leave room for much praise. I’m sure we will see a drop since there always is [a drop in rates] during an election year.
Chad: How was the mortgage market during the Trump era?
Mike Rishel: It’s hard to say anything terrible about those years regarding the mortgage market. Four years of rates below 5 percent, with rates mainly in the 2 percent range, makes any homebuyer happy!
Every year, the mortgage market provides us with a different path. For consumers in 2024, they are facing a fork in the road.
Which consumer will you be? The one that takes the risk along with built-up equity in your current house, or will you be that consumer who walks around your new neighborhood telling your new neighbors about how you grossly overpaid for your new home but got a low rate?
More housing inventory is expected to come online, which generally means more sales. Zillow has stated that “the South, Midwest and Great Lakes regions are expected to thrive compared to the rest of the U.S., because of their relative affordability,” while New Orleans, San Antonio, Denver, Houston, and Minneapolis sit at the bottom regarding demand.
It is worth noting that U.S. consumer sentiment improved in January, reaching its highest level in two and a half years. It is also worth noting that the market anticipates the Fed will lower rates multiple times this year.
If the Fed balks, housing prices may drop due to a lack of demand, which will only lower mortgage payments in specific markets and increase activity.
Since we’ve hit rock bottom in the housing market, I think the only way to go from here is up.