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The housing market received some encouraging news this past week as the Federal Housing Agency announced an increase in conforming loan limits in 2024, while interest rates declined this week for the sixth consecutive week. Tight supply and high cost of borrowing are the two primary factors that slowed the housing market this year. With loan limits rising and mortgage rates declining, more people should be able to afford to buy a home, and the market should begin to turn around in the first quarter of next year. In the meantime, an improvement in consumer confidence last month is a welcome sign that suggests the economy is doing fine as the Fed continues to engineer a soft-landing scenario. A recession is still expected by many as we are about to enter 2024, but a mild one is what most people anticipate in the upcoming year.
Conforming loan limits up for 2024: To keep up with higher home prices, the maximum baseline conforming loan limit for one-unit properties will increase 5.6% to $766,550 in 2024 from $726,200 in 2023, the Federal Housing Finance Agency (FHFA) announced last week. For high-cost states like California and New York, higher loan limits will also be adjusted with the new ceiling being raised to $1,149,825 next year from $1,089,300 this year. The conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can buy or “guarantee.” As conforming loans typically have lower interest rates than non-conforming loans, the increase in the limits next year should benefit many California homebuyers, especially since home prices are expected to grow moderately in 2024.
Mortgage rates at lowest level in eleven weeks: Mortgage rates fell for the sixth consecutive week as the U.S. economy slowed in recent weeks while inflation showed further signs of cooling. The average 30-year fixed rate mortgage reported by Freddie Mac dropped another nineteen basis points (bps) to 7.03% yesterday from the prior week and reached the lowest level since mid-September. Meanwhile, mortgage applications for the week ending November 24 inched up 0.3% from the prior week as lower rates stimulated demand, according to Mortgage Bankers Association. The number of purchase applications (seasonally adjusted) was 5% higher than one week earlier but was below the same week of last year’s level by nearly 20%. While mortgage demand is still below the historical norm, the increase observed in the past month is encouraging and the market will hopefully continue to bounce back in the final month of the year.
Consumers feel slightly more upbeat in November: Consumer confidence bounced back after dropping three months in a row and remained near its recent low. The Conference Board’s index increased in November to 102.0 from a revised 99.1 in October, but the latest monthly figure was still the second-lowest reading of the year. Consumers, in general, were more positive last month with 19.8% of them saying business conditions were good, a slight increase from 18.3% in October. Their overall expectation on the short-term outlook was also less pessimistic, as 19.5% expected business conditions to get worse in the next six months, down from 20.9% in October. Recession expectations over the next 12 months also receded to the lowest levels seen in 2023, but two-thirds of the respondents still anticipated a downturn. Buying plans in the next six months for big-ticket items - including homes - trended down last month, reflecting persistent concerns about elevated interest rates and shrinking Americans’ savings.
Construction spending continues to rise in October: Construction spending improved for the tenth consecutive month in October, with total outlays rising 0.6% month-over-month in October. Total residential construction increased 1.2% from September and registered the fifth straight month with a gain at the start of the fourth quarter. Compared to the same month of last year, residential outlays were up 0.9%, and recorded the first year-over-year improvement since November 2022. Tight inventory in the existing housing market continued to propel residential construction, with spending on single-family climbing 1.1% month-over-month and posting its sixth consecutive increase in October. Multifamily outlays, on the other hand, dipped again for the second straight month as builders pulled back on new starts due to the anticipation of an abundance in supply in coming months. Commercial construction remained weak in October as macroeconomic headwinds intensified and new development lending continued to be restrictive.
If you would like to discuss if now is a good time for you to buy, sell, or invest in a home or investment property, please feel free to contact me.
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Huntington Beach 92648
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Long Beach 90815
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251 Elm Ave.
Long Beach 90802
2 Bed+Den | 3.5 Bath | 1,750 SF | $915,000
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930 E 1st St. #2
Long Beach 90802
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Torrance 90504
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Long Beach 90805
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Cypress 90630
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San Pedro 90731
3 Bed | 2 Bath | 2,067 SF | $1,225,000
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773 W 30th St
San Pedro 90731
3 Bed | 2 Bath | 1,040 SF | $955,000
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Redondo Beach 90277
2 Bed | 2 Bath | 1,181 SF | $1,175,000
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