Rising mortgage rates, elevated construction costs and chronic construction labor shortages have led to negative quarterly growth rates in single-family home building for all geographic markets since the beginning of 2023.  

In its Nov. 21 forecast, Fannie Mae economists said they expected sales of existing homes to drop to a seasonally adjusted annual rate of 3.9 million homes during the final three months of this year, which would be the lowest pace of sales since 2010.  Economists at the Mortgage Bankers Association are more optimistic, projecting that home sales bottomed in Q3 2023 and are poised for eight consecutive quarters of growth.

But most economists believe the lack of housing inventory is likely to remain a challenge. The majority concurs that we’re unlikely to see anything that meaningfully affects housing affordability.

Average Mortgage Payment is $2,575

Rates for 30-year fixed-rate mortgages averaged 6.96 percent in early December, down nearly a full percentage point from a 2023 high of 7.83 registered on Oct. 25.  The shift has pushed the average mortgage payment down $164 to $2,575, reports Inman.

Even as mortgage rates are expected to continue declining over the next year, the primary drivers of housing pessimism continue to be persistent affordability challenges and worries about household finances, reports Inman’s Mortgage Brief Newsletter.  Prices in October were 69% higher than their last peak during the housing boom in March 2006. Nationally, the median sale price for an existing home in October rose 3.4% compared to a year ago, reaching $391,800, according to National Association of Realtors data.

Homeownership Defines Financial Success

REALTOR® reported in November that house hunters, particularly first-timers, continue to face intense competition and bidding wars when making offers on available properties.  Despite this, younger buyers remain determined.  Some 60% of Gen Z respondents, and nearly 60% of millennials, said they think homeownership is more important than it was during their parents’ generation, according to this year’s Bank of America Homebuyer Insights Report.

The sentiment may be contagious, as Bank of America found that, irrespective of age, those it surveyed ranked homeownership — above paying down debt, retiring early and having an emergency fund — is the No. 1 definition of financial success. 

The Federal Housing Finance Agency (FHFA) said that because of rising home values, the ceiling loan limits will be higher in all but five U.S. counties or county equivalents in 2023. FHFA raised the maximum baseline conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2024 to $766,550—an increase of $40,350 from 2023. The new ceiling loan limit in high-cost markets will be $1,149,825, raised from the previous ceiling of $1,089,300. SEE THE LIST OF 2024 MAXIMUM CONFIRMING LOAN LIMITS FOR TEXAS COUNTIES HERE.

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