May 2024 Market Insight
Where did rates end in the month of May?
30 Year Fixed Rate Conventional Average: 7.571% (0.048% decrease month over month)
30 Year Fixed Rate FHA Average: 7.425% (0.112% increase month over month)
30 Year Fixed Rate VA Average: 7.458% (0.062% increase month over month)
Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice. These rates are based on a $400,000 loan amount with 20% down payment and 740-759 credit score.
What Happened This Month in the Mortgage and Real Estate Space?
Economic indicators played a significant role in shaping the real estate and mortgage sectors this month. Here's a simplified overview of key points:
Unemployment Rate: As of May 17, 2024, the national unemployment rate was 3.9%, up by 0.5 percentage points from April 2023. This rate has been stable, ranging from 3.7% to 3.9% since August 2023. While a rising unemployment rate can be tough for families, it helps reduce inflation, as people spend less money when they lose jobs. The unemployment rate has been under 4% for over two years now.
Consumer Spending: The annual growth in the PCE price index remained steady at 2.7%, with the Fed's preferred core PCE price index increasing by 2.8% for the third consecutive month. Steady consumer spending growth is a good sign for the economy, reflecting ongoing confidence in the market.
Consumer Debt: The Federal Reserve Bank of New York's Center for Microeconomic Data reported that total household debt in the United States increased by $184 billion in the first quarter of 2024, reaching $17.69 trillion. This includes debt from mortgages, car loans, student loans, and credit cards. The high debt levels are concerning because it’s unclear how people will manage to pay back this debt.
Interest Rates: The Federal Reserve met on May 1, 2024, and Chairman Jerome Powell announced no more rate hikes. This decision initially helped the market, causing rates to drop for nearly two weeks before rising again later in the month. Elevated interest rates, driven by strong economic indicators, significantly impact borrowing and spending behaviors.
Gross Domestic Product (GDP): In the first quarter of 2024, GDP grew at an annual rate of 1.6%, less than half of the 3.4% growth in the last quarter of 2023. However, private final sales to domestic purchasers increased by 3.1%, indicating solid underlying growth.
Will the Housing Market Crash in 2024?
My Take on It:
No, the market is not likely to crash due to the low inventory of homes. Many people have locked in sub-3-4% interest rates, which means there won't be a wave of foreclosures or a rush to sell. However, market conditions can vary by region. For instance, Florida has more inventory and slower sales, leading to price drops, while urban areas in North Carolina have high demand and stable prices.
Expert Opinions:
Tom Hutchens, Angel Oak Mortgage Solutions: The record low supply of houses on the market protects against a crash.
Orphe Divounguy, Zillow Home Loans: Home prices may see slower appreciation but won't plummet. Several factors like Millennials entering prime home-buying years and wage growth will sustain demand.
Bill Adams, Comerica Bank: National house prices are expected to rise by 2.9% in 2024.
Foreclosures in 2024:
According to Attom, foreclosure starts showed a slight increase in the first quarter of 2024, but overall foreclosure activity is still below pre-pandemic levels. This is due to a strong economy, low unemployment, and good loan quality. Most homeowners have significant equity, reducing the risk of foreclosure.
When Is the Best Time to Buy a Home in 2024?
My Personal Take: Buy when you are ready or need to. Timing the market is challenging, and it’s best to purchase when it makes sense for your family. Whether you need a bigger yard, want to move to a better school district, or have other reasons, find a payment that’s comfortable for you and won’t cause undue stress.
Experts agree that buying a home is a personal decision and advise against trying to time the market. It’s important to be in a solid financial position and look for a home that meets your needs and budget. Building equity and net worth by getting on the housing ladder is beneficial in the long run.
