There’s a classic joke about psychiatrists: How many psychiatrists does it take to change a light bulb? Just one, but the light has to really want to change. Change isn’t for everyone!
The year 2024 is poised to usher in significant changes for homeowners, promising a challenging landscape shaped by two pivotal factors: anticipated rate cuts and the possibility of home price decreases. These developments will undoubtedly impact homeowners’ and homebuyers’ financial decisions and goals in the coming year.
The transition to a new monetary era characterized by expected rate cuts next year will be crucial for the housing markets. After two years of rate hikes and tightening monetary policy, central banks are signaling a move toward more accommodative measures. These rate cuts are anticipated to have far-reaching implications for homeowners. And it’s not merely rate cuts—as the Fed will need to change “monetary policy,” which works behind the scenes to impact money and the cost of funds.
Lower interest rates can open the door to advantageous homeownership opportunities. It will bring more prospects for buying and the potential to reconsider investment opportunities for those sidelined by the rapid rate spike. I expect 2024 to be a year full of stimulated home-buying activity, potentially creating a more dynamic housing market, the likes of which we have not seen in a while.
The second major change for homeowners concerns home equity. Equity utilization is an important vehicle for those who own a home and have reaped the rewards of the tremendous market appreciation. Rate cuts will encourage homeowners to tap into their accumulated home equity. This can benefit various financial goals, including home improvements, debt consolidation or investing in other assets. But here is the key: Those homeowners who wait for the cuts first to tap their equity will be missing the boat.
Traditionally, lower mortgage rates tend to stimulate home-buying activity, potentially creating a more active housing market. Homeowners considering selling their properties might find increased demand and potentially higher sale prices. 2024 might prove to display a different reaction to the historical norms as it is an election year, and there are too many variables in the marketplace to default to past standards.
While home prices have been on an upward trajectory in recent years, several factors could contribute to a shift in this trend. I feel that these three factors will be critical to how 2024 turns out for homeowners: changing economic conditions, housing supply and demand, and regional market variations.
In anticipation of a changing market, homeowners should consider several key factors: First, assess the current interest rates on all debts and explore consolidation opportunities. Second, evaluate your home equity and determine how it can support your financial goals in a fiscally sensible manner. Third stay informed about regional housing market trends. Keep an eye on local conditions and housing inventory to make well-informed decisions regarding selling or buying a property. Finally, maintain a robust financial plan that includes an emergency fund, a debt management strategy and long-term financial goals.
Preparing for potential market fluctuations is essential for financial stability. Seizing the opportunities presented by these changes requires deliberate financial goal-setting. Remember that your financial journey is a dynamic process, and regularly reassessing your goals ensures that you stay on the path to financial success.
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at Shmuel@approvedfunding.com.
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