Many purchasers have found it very hard to enter the house market during the last two years. The combination of rising mortgage rates and rising property prices made the prospect of purchasing a home difficult—and, for sellers, losing their sub-3% mortgage rates due to the epidemic made it practically impossible to sell their present properties.
Indeed, home prices reached a new high for the tenth consecutive month in January, according to the First American Data & Analytics Home Price Index study. Home prices in January 2024 were 7.2% higher than the same time last year, but the research also indicates that peak appreciation may have passed. Mark Fleming, chief economist at First American, told Fortune that this is due to anticipated reduced mortgage rates.
“The expected lower mortgage rates this year will obviously help buyers by improving their home purchasing power, but it also reduces the financial cost of the rate lock-in effect,” says Fleming, who has a long history of analysing housing market economics. Prior to his tenure at First American, he worked for CoreLogic, which also produces monthly house price index data, and Fannie Mae. Fleming continues to generate monthly house price index statistics for First American.
“The pace of annualised home price appreciation peaked in December, as buyers rushed to take advantage of falling mortgage rates,” Fleming said in his January 2024 report. “In January, the preliminary estimate of annualised appreciation dropped mildly by half a percent and is expected to decrease further in the
More supply this year is unlikely to result in outright price decreases, rather slower appreciation,” Fleming adds. he said, “the expected moderation in the pace of home price appreciation due to lower mortgage rates in 2024 will be good for potential home buyers as it was harder for homebuying power to keep up with home price appreciation last year.”
On the other hand, slowing house price appreciation may finally provide present homeowners another reason to sell their property. With reduced mortgage rates and less chance of banking high home equity values upon sale, the lock-in effect may ease for sellers and encourage them to return to the market.
More sellers may be eager to sell, and inventories may be less constrained than last year. “More supply means less upward pressure on house prices,” Fleming states.
Looking back from January 2023 to January 2024, all 30 major housing markets analysed by First American had home price gains that above the national average. In January, starter house prices in Nassau County, N.Y. (a Long Island suburb), increased by 17.8% year over year; Pittsburgh and Miami witnessed 12% rises in their mid-tier and luxury-tier housing prices, respectively.