What Lies Ahead in Real Estate Market In Los Angeles in 2024
Mortgage Rates in the 5s by Mid-2024
When we analyze the historical trajectory of mortgage rates, it becomes evident that 30-year mortgage rates have consistently moved in concert with the 10-year Treasury yield. This long-standing pattern offers valuable insights into our projection that mortgage rates will potentially reach the 5s by mid-2024. Let's embark on a detailed exploration to understand the rationale behind this viewpoint.
The Current Scenario:
Today, mortgage rates are hovering around 6.67%. This might seem high, but the key to understanding the potential drop lies in the "spread" over the 10-year Treasury rate, which currently stands at 279 basis points (bps). To put it in perspective, over the last 50 years, the average spread has been significantly lower, averaging 172 bps. Even if we conservatively anticipate the spread narrowing to 200 bps, mortgage rates would already be at 5.88%.
A Return to Normalcy:
The projection isn't solely about the 10-year Treasury rate dropping further, although that possibility remains. Instead, it hinges on the "spread" returning to more traditional levels. The question lingers on how much the spread will settle above historical norms.
What About Home Prices in Los Angeles in 2024
If you're worried about the potential for declining home prices, take comfort in the consensus among experts: the outlook for 2024 suggests that home prices are poised to experience steady and healthy growth. Whether you're preparing to buy or sell a home in the upcoming year, the real estate landscape appears promising.
Factors Accelerating the Process:
Recognizing the aggressive nature of expecting the compression to double over the next six months, I deduce two factors will contribute to this acceleration:
Reduced Pre-payment Fear: As rates stabilize, there will be less fear surrounding pre-payments. This factor alone can encourage lenders to offer more favorable mortgage terms.
Increased Business Motivation: Mortgage entities will be incentivized to do more business in a competitive market, potentially driving them to narrow the spread and make homeownership more accessible.
Market Insights:
In November 2023, a "deficit" of -51,886 homes was listed, slightly down from the -73,968 "deficit" in November 2022. This suggests that the peak "lock-in effect" might be behind us. The hope among many real estate agents is that a combination of sellers and buyers acknowledging that 3% and 4% mortgage rates will not return anytime soon, coupled with mortgage rates falling back under 7.00%, might be enough to stimulate more listings in the market in 2024.
Top 3 Reasons for Home Search Pauses Will Change in Los Angeles Housing Market
As we set our sights on the approaching year of 2024, exciting shifts are on the horizon in the world of real estate. Anticipate lower mortgage rates, bolstered purchasing power, and a surge in available inventory, all poised to create opportunities for prospective homebuyers. The dream of homeownership is more attainable than ever, so keep those aspirations alive because 2024 is shaping to be a remarkable year for the housing market.
Lower Mortgage Rates: One of the critical pillars of optimism is the expectation of lower mortgage rates. Drawing from historical data, we've seen a consistent correlation between 30-year mortgage rates and the 10-year Treasury yield. This historical trend suggests that mortgage rates will dip into the 5s by mid-2024. This anticipated drop in rates opens up a window of opportunity for buyers, making homeownership more affordable and accessible.
Increased Purchasing Power: Lower mortgage rates reduce the cost of borrowing and enhance buyers' purchasing power. With the potential for mortgage rates to become more favorable, buyers can qualify for more significant loan amounts while maintaining comfortable monthly payments. This means that the dream of owning a home with the desired features and location becomes more achievable for a broader range of individuals and families.
Expanding Inventory: Another encouraging aspect is the projected increase in available housing inventory. Recent data indicates more homes will be entering the market. This increased inventory gives buyers more choices and lessens the pressure of competing in a tight seller's market.
Real Estate Trends:
Freddie Mac reported a 0.6% month-over-month increase in its "National" Home Price Index (FMHPI) in November. On a year-over-year basis, the National FMHPI was up 6.3% in the same month.
Conclusion:
The real estate landscape is constantly evolving, and it's essential to stay informed to make informed decisions. It's worth noting that Month-Over-Month numbers tend to slow down later in the year as the real estate market adjusts to changing conditions. The coming year promises exciting opportunities to secure their place in the housing market, marking a new chapter in the journey toward homeownership. With lower rates, enhanced affordability, and more housing options, 2024 is poised to be a year of accomplishment and fulfillment for those pursuing the dream of having a place to call home.