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Is The Housing Market Entering A Recovery Phase?

December 8, 2023

FHA Loans

After briefly approaching the 8% home loan interest rate range, sources (including real estate company Redfin and NBC.com) report December 2023 conditions might be an indication of a housing market recovery or turnaround.

Both NBC and Redfin report home loan interest rates falling to just over the 7% mark after hitting 8% in October 2023. Rates had formerly not reached those highs over two decades.

According to NBC News, “The interest rate on a 30-year fixed mortgage is down to 7.03%”, with mortgage applications up by roughly 15%. That after reaching major lows in the previous month.

Housing Market Recovery Signs

Home loan applications may rise in 2024. Consumers may feel freer to apply, based on a perception that things are improving. Another factor that could be informing higher application rates? The idea that the Fed may be done raising interest rates in the interim.

However, at press time, not everyone is convinced a recovery is imminent. It’s a lack of confidence which may serve to slow any housing market recovery in the meantime. But recovery is likely to happen if conditions improve. The “if” is the real question.

Fed Action On Interest Rates

The Federal Reserve took aggressive measures to control inflation. For better or worse that included the process of increasing the interest rates the government charges lenders to offer credit. This done by increasing the Federal Funds Rate.

That rate was formerly just above 0%. It went as high as 5.5%, a major factor changing how and when people might commit to a new mortgage.

Higher mortgage loan rates stopped many plans to refinance. Potential buyers pulled out of the housing market over rising rates and costs. And then there was the lower number of homes for sale in 2022.

The supply of available homes for sale, when it is reduced, translates into more power the for seller over the transaction. This is because of increased competition for a limited inventory of homes. 2022 was definitely a seller’s market, but conditions seem good for continued improvement (however small) as we move into 2024.

What’s Ahead For The New Year?

NBC and Redfin both report the idea some have that only a greater amount of houses for sale will fix conditions to prevent the 2022 seller’s market from recurring in 2024.

NBC.com reports one big factor that could help bring sustained change? A lot more homes for sale. According to Redfin, “That’s starting to happen in some markets” which is an encouraging sign.

Lower FHA home loan rates for a day, a week, or a month may not be enough to be considered an actual trend or rate recovery.

However, when you start noticing that interest rates are lower persistently so, that may be the best indication that a recovery may be happening, for real. 

If you feel ready to try the housing market as a buyer, shop around and compare multiple participating FHA lender willing to work with you and your circumstances, your credit report and scores, and down payment requirements.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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