The housing market is gradually recovering. Experts, like Lawrence Yun from the NAR, expect it could be more balanced by the end of the year. Factors such as mortgage rates, inventory levels, and home prices are all connected and influencing this recovery.

Mortgage Rates and Inventory

A key change on the horizon is a shift in mortgage rates. As inflation slows and the Federal Reserve likely lowers interest rates later this year, mortgage rates are expected to improve. Forecasts suggest the average rate for a 30-year fixed mortgage will be between 6% and 6.5% by the end of 2024. Lower borrowing costs should encourage more sellers to list their properties and spur new construction. Currently, 90% of markets have seen improved inventory levels year over year.

Stabilizing Home Prices

With more homes available, home prices are expected to stabilize, growing around 2% to 3% annually. Although it is not yet a buyer’s market, homebuyers now have more negotiating power. The market is less competitive than during the pandemic, allowing buyers to negotiate prices more and avoid waiving inspections or appraisals. Sellers might also offer to buy down mortgage rates to close deals.

Gradual Changes Preferred

A slow adjustment in mortgage rates and home prices is better than sudden changes. A sharp drop in rates could bring a surge of buyers, driving prices up once again. Ideally, both rates and prices will move toward equilibrium steadily, preventing new market imbalances.

Economic and Political Factors

The market’s future will depend on economic factors like the labor market and political policies, especially with the upcoming general election. These factors will significantly influence housing demand, prices, and overall market stability.