Discover the real impact of mortgage rates on 2024 home values.

In the current real estate discourse, there's a lot of speculation about how home values will respond to changing mortgage rates. Contrary to some predictions, it's unlikely that home values will skyrocket with lower mortgage rates, nor will they crash dramatically.

A crucial factor in understanding this market trend is the history of new home construction. A graph showing the last 50 years of home construction reveals a significant drop starting in 2008, coinciding with the market crash. This decline was due to an oversupply of homes. However, during this period, the population continued to grow, increasing by nearly 35 million people from 2008 to today.

This population growth has resulted in more buyer demand than ever. The market saw a reduction in home prices and a halt in new construction between 2008 and 2013, leading to an undersupply of homes. Additionally, the adjustable mortgage rates prior to 2008 led to foreclosures when rates rose. Conversely, when interest rates plummeted in 2020, a surge in the market caused home prices to rise sharply.

“Expect home prices to remain stable.”

Many homes bought during this period are owner-occupied, purchased with fixed or locked-in rates as low as 2% or 3%. These homeowners now have little incentive to move due to their low mortgage payments. So, what does this mean for home values in 2024? In areas like Richmond and its surroundings, we may see some appreciation, but it's unlikely to be a steep rise.

Home prices are not expected to soar or plummet. Mortgage rates are likely to stabilize around 5% or 6%, and new home inventory will begin to align with pre-pandemic levels. However, this inventory will still be below the actual buyer demand, likely leading to relatively stable home prices.

In 2024, unless significant economic changes occur or there is an influx of inventory, expect home prices to remain stable. If you have any questions about the current real estate market or are contemplating buying, selling, or investing in real estate this year, feel free to reach out to us for guidance. Remember, it’s not the market… it’s the marketing that makes the difference!