Home buyers struggle in 2023, but homeownership rate could rise in 2024
The homeownership rate hit 66% in 2023 even though inventory was low and home prices high. (iStock)
The housing market struggled last year. The inventory on the market had already dropped significantly the year before to the lowest since the Fed began collecting the data in 2016, according to Federal Reserve Economic Data. All the while, housing costs jumped to the highest on record.
Through this difficulty, the homeownership rate stayed steady at 66% at the end of 2023, according to the Census Bureau's quarterly report. This rate remained unchanged from the end of 2022.
But that could soon change and the homeownership rate could rise as the housing market is looking up for the year ahead.
If you are ready to shop around for a home loan, consider using Credible to help you easily compare interest rates from multiple lenders in minutes.
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The housing market is heading toward recovery in 2024
There is hope on the horizon for those who have been waiting for the housing market to calm down. The end of the year saw mortgage rates drop from more than 7% at the end of October to 6.62% in the first week of the new year, according to Freddie Mac data.
"We’re not going to see a major breakthrough in the logjam that has been the housing market over the last year or so, but 2024 will be a baby step in the right direction," explained Realtor.com Chief Economist Danielle Hale. "It’s going to stop getting worse."
The Fed is likely to drop interest rates again, hoping to drop them to 4.6% by September 2024. This rate drop could help reinvigorate the housing market, since buyers with the right credit profile could qualify for a much lower rate than in recent years. The National Association of Realtors projects a 13.5% increase in home sales, as buyers flood the market.
The only negative prediction for 2024 is the continued housing shortage. While interest rates are likely to drop, they’re still not as low as they were a few years back. Those who own their homes won't necessarily be willing to sell because they would need to buy another home with a potentially higher rate.
"We’re talking about moves of necessity for people," Hale said. That means sellers will only move when they must, be it divorce, relocating for work or retirement.
If you’re looking to purchase a home in today’s market, you can explore your mortgage options by visiting Credible to compare rates and lenders and get a mortgage preapproval letter in minutes.
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How to increase your chances of homeownership
Becoming a homeowner isn’t an easy task, especially in today’s current market. Before diving into the home search, spend the time it takes to make yourself a desirable candidate for sellers and lenders.
To better your chances of qualifying and securing a home, consider making the following moves:
- Get your credit score in shape: You don’t need a perfect credit score to get a home, but having a good one goes a long way. Your credit score helps determine a lot, including the interest rate you qualify for.
- Understand all your loan options: There are many loan options to choose from, each one designed with a particular borrower in mind. Research the loan options available to you before meeting with a real estate agent or mortgage officer.
- Focus on paying down other debts first: Mortgage providers look at your income and debt when deciding if you qualify for a loan. If you have a high amount of debt, lenders are wearier about lending you large amounts necessary to purchase a home. Make yourself look better to lenders by figuring out a debt payoff plan.
- Consider making a larger down payment: Contrary to popular belief, you don't always need to put 20% down when buying a home. Plenty of mortgage options come with lower down payments, but there’s a reason that’s the conventional number suggested. A higher down payment shows good faith to lenders, potentially securing you a lower rate. Plus, you pay less in interest over the life of the loan since your principal is less.
Finding the right mortgage interest rate is just as important as finding your dream home. To compare interest rates through multiple lenders, visit Credible and input some basic information. You’ll see multiple lending options in one place.
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