George Kamel - Forecasting the 2024 Housing Market

Episode Date: January 31, 2024

💵 EveryDollar Budget Deal: Get a 14-day free trial and $15 off your first year of the premium version of EveryDollar About this episode: Will this year’s housing market be another wild ride? In today’s video, I’m looking at what the experts are predicting for 2024 and what it means for you. Next Steps: 🏠 Find out how much house you can actually afford 📗 Order George Kamel’s new book: Breaking Free From Broke Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

If you've been paying attention to the housing market these last few years, you know that it's felt something like this. Or maybe this. And it's funny because it's depressing, and it's depressing because it's true. But will this year be any different? Are we on the other side of quasi-price gouging and relentless rate hikes? Well, to be honest, predicting the housing market can be as reliable as weather forecast. The pros do their best with the data they have,

but no one can know for sure what's going to happen with 100% accuracy. Not even Danielle Breezy, Chief Meteorologist, Channel 2. If that really is your name, Breezy, I want answers. Who names their kid Danielle? It's a weird name. That's not what I thought you were going to say. So let's take a look at what experts think might, could happen in 2024. But first, we interrupt your regularly scheduled programming with an emergency weather alert.

That's right, folks. If you're traveling through the area today, it's going to be a dicey one. We've got a lot of elements at work. Northeasterly winds causing some wind gusts up to 40 miles per hour. And that means right now there is a like and subscribe advisory in effect, which will last until the end of this video. So go ahead and hit those buttons. The advisory will be lifted by the Ramsey Network.

Make sure to stow away any items that aren't secured to the ground. Share this video with loved ones so they can watch it safely from an interior room. We'll have more on this real soon. Stay safe. Love you guys. Back to you in the studio, George. All right, let's start with the obvious rain cloud on everyone's mind. mortgage rates. Mortgage interest rates have been the talk of the town over the last few years, thanks to the Fed raising them willy-nilly every now and then just to make sure we're paying attention.

Even the smart people in those Joseph A bank suits on Wall Street can't figure out when the Fed will take the edge off of these rates, or even if, heaven forbid, they're going to raise them again. But thankfully, we've recently seen the rates go down for the first time in a long time. So what will happen next? Well, the National Association of Realtors, aka NAR, or if you're Australian... No! thinks raised for 30-year mortgages will continue to go down in 2024. But they're predicting a dip from 7.4% to 6.3% by the end of the year.

And you can never count on the Fed to drop it too low. Drop it up and low, drop it low, low, drop it low, drop it low, drop it low, drop it low. I'm sorry, or you're welcome. Now, that could mean a drop of a couple hundred bucks on your monthly mortgage payment. Not a precipitous drop per se, but we're going to take the win where we can get it. For example, let's say you're buying a $300,000 home with a 20% down payment. payment on a 15-year mortgage. Love that. That little rate drop would take your monthly payment from 2,225 to 264. That's a difference of 150 bucks. And while that could be great for some

home buying hopefuls, a lot of people will still struggle to afford a mortgage. And while the folks at NAR think that could slow buyer demand, it's likely that the number of people wanting to buy a home still outweigh the number of homes available. This is simple supply and demand. And low supply, high demand means home prices will unfortunately mostly stay the same in 2024, aka pretty freaking high. So what are home prices looking like these days? In October of last year, the average home price in the U.S. was nearing $750,000. But before you spit out your milk, which you should do anyways, because some people are lactose intolerant and it's offensive. I'm jealous. I want milk from the cow, not from the oat. What are you doing? Just milk in the almond.

Are you kidding? Yeah. You see, most experts actually report on the medium number because it's right smack dab in the middle of lowest to highest prices. And that's because the average can be influenced by a small group of super high or super low outliers that can throw off the accuracy. All that to say, keep it in mind as you see scary headlines about crazy averages in 2024. So if instead we look at the median home price from this past October, it was $425,000. Not amazing, but undeniably more palatable.

But the main thing to know about this in any market is that home prices are determined by the number of houses for sale and the number of people looking to buy them. So when fewer houses are available, buyers are willing to pay more, and sellers have more leverage to increase their asking price. Which is why chronically low inventory has caused buying a home to feel as outrageously priced as public parking, so-called process and handling fees, or even a venty sugar cookie latte. But will there finally be more inventory to lower home prices this year? Well, drum roll please.

Probably not. Even though plenty of new houses are being built, it's not happening fast enough to make a major difference in the overall number of homes available. In fact, the number of new builds was down 13.8% year-to-date in October 20203. Not a great sign. So with home prices and inventory not making any crazy moves, this could also cause buyer demand to sink in 2024. But before you let this harsh your mellow, there's some good news for you hopeful homebuyers

out there. Since the market isn't quite as hot as it was in the past few years, you'll have a few more options and less competition. Yes, prices are still high, but the frenzy is slowing down. So that's something, right? Huh? That is something. Now, all you home sellers out there, you've still got the upper hand here.

So if you're planning to sell your house, you can expect it to go fairly quickly for close to your asking price, as long as your asking price is realistic. And yes, I know it's easy to overvalue the custom wet bar you built into the master bath, and I know those memories of mixing up a spritz and taking a soak in the jacuz are priceless, but listen to your real estate agent here. They will help you price it fairly and make sure your house actually gets sold. Oh, and caveat, just because Zillow said you could get it, $800,000 for your third floor condo with a parking lot of view, doesn't mean it's actually worth that.

Ask your agent to pull comps for the area to get a realistic number. All right, we've covered a lot of ground here, a lot of nerd talk, so let's recap the key points. Even if interest rates continue to decrease in 2024, it won't be by much. Housing inventory will still likely be low in 2024. The home buying frenzy is cooling off, and it's still leaning in the direction of a seller's market. So, with all of that in mind, here's how I look at all of this. When it comes to interest rates, date the rate, marry the house. I don't think the market or interest rates should determine your decision to buy a house.

If you're prepared financially to buy a home, then it's a good time to buy a home, even if rates are high no matter what the market's doing. You can always refinance later if and when the rates go down. On the flip side, if you're not financially prepared, it's never a good time to buy a house, even if rates are down. And it may seem overly simple, but this basic principle will help you avoid getting tossed back and forth every time the Fed decides to mix things up. So if you want to know if you're ready to buy a house in 2024, here are some good guardrails. One, you're debt-free. You've paid off all of your consumer debt. Number two, you have an emergency fund of three to six months of expenses saved up.

Number three, your house payment will be 25% or less of your monthly take-home pay on a 15-year fixed-rate mortgage. P.S., you want to steer clear of government-backed loans and some of these first-time homebuyer programs. They have a lot of fees, red tape, fine print, and restrictions. Not worth it. Next, you've got to have a solid down payment. 20% down is ideal because you'll avoid something called private mortgage insurance, or PMI.

But you can put down 5 to 10% if you're a first-time home buyer. Just be prepared to pay that pesky PMI. Next up, you've got to be able to pay the closing costs up front without stealing from your down payment. And lastly, you're in a position to stay in the home for at least three to five years. Remember, this is a long-term decision in the most expensive purchase of your life, only to be followed by a car and apparently the Galentine Stanley Cup. $55 for a tumbler. Because it fits in my cup holder.

I don't care if it fits in your cup holder. A lot of cups fit in cup holders. Now this is where the tough love comes in. If you don't meet those qualifications, you're outside of those guardrails, you're not in a good financial position to buy. You've got to have some patience here. It doesn't matter if the market is in your favor because buying a home in that case would end up being a burden instead of a blessing.

So pray for patience, get that financial foundation under you, take a soak in the jacuzza if you need to, and work towards getting yourself in a better financial spot so you can buy a house the right way with peace. Bottom line here, you control your financial future, including your real estate decisions. no matter what's going on in the market and what the Fed is doing and what could happen and what the headlines say. So here's a deal. Let me know in the comments what questions or concerns you have about the real estate market this year. I'll try to answer as many as I can. As always, share this video with someone special in your life.

Maybe it's your real estate agent, your jacuzzi buddy, or maybe they're one and the same. No judgment. We all need a friend and a jacuz bud. And if you're thinking seriously about buying a home this year, make sure to check out my video and how much house you can actually afford based on your income. It's a real eye opener and could help you avoid some major mistakes. Thanks for watching. We'll see you next time.

Or even a venty sugar cookie. Sugar cookie.