2024 Housing Outlook: Impact of Fed Rate Cuts on Affordability and Market Shifts

According to experts, the Federal Reserve’s handling of rate cuts will greatly impact the affordability of housing in 2024. Mortgage rates are currently hovering above 7% for 30-year, fixed rate loans, which is higher than the historically low rates seen during the pandemic. Economists predict that rates will remain higher in 2024 and will only begin to fall once the Fed starts cutting rates. However, even if rates do fall, they are unlikely to return to the lows seen during the pandemic. Despite some hesitancy from potential buyers due to higher mortgage rates, Redfin CEO Glenn Kelman suggests that people purchasing homes now will benefit from getting a better price than those who wait. Kelman also notes a shift in markets as potential buyers pull back from states like Texas and Florida, which were popular moves during the pandemic. Once prices come down in these states, people will “step back in,” he says. However, Kelman warns that sellers and buyers are always “going to be sticky” due to uncertainty in the real estate industry. Buyers are looking at the next six months, while sellers are considering what they could have gotten over the previous six months. A recent analysis shows that home prices have surged 47.1% since the start of 2020, far exceeding gains seen in recent decades. Higher mortgage rates over the past three years have created a “golden handcuff” effect in the housing market, with sellers reluctant to sell due to record-low mortgage rates they locked in during the pandemic. The shortage of homes in the country, fueled by years of underbuilding and expensive construction materials, has led to a “good” sign in markets like Florida and Texas, where prices are coming down and new construction is becoming more affordable. Overall, the handling of rate cuts by the Federal Reserve will greatly impact the affordability of housing in 2024, with some experts suggesting that certain U.S. States are already experiencing positive signs.