Cash is king: High mortgage rates are changing home-buying trends
Though the Federal Reserve will likely cut rates in September, customers are still facing a challenging market.
2024 has been a tough year for prospective home buyers. Limited housing inventory, historically high interest rates, and inflated home prices have created barriers for those hoping to purchase an reasonably priced home this year.
Though 30-year fixed-rate mortgages have hovered between 6% and seven% over the past 365 days, experts await that rates will continue to drop. The CME FedWatch predicts that the Federal Reserve Bank will cut interest rates twice by the tip of 2024.
Though a September cut is widely expected at the upcoming Federal Reserve Board meeting, an additional rate cut may beef up consumer self belief in the housing market.
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The inability of affordability has prompted consumers — specifically young buyers— to explore co-buying homes. 26% of buyers purchased a house with a pal or member of the family, and forty four% of all buyers cited affordability as the principle driver for co-buying.
TheStreet spoke with Ryan Serhant, Real Estate Broker, TV personality, and CEO of SERHANT, about the 2024 housing market and how consumers are adapting to new challenges.
2024 housing market trends
The heightened demand for housing has created an exceedingly competitive market where cash offers are changing into one in every of the most effective attributable to purchase a house.
“Cash is king,” Serhant said. “Pre-Covid-19 in New York City, you would have 30% to 35% of buyers paying in all cash, regardless of whether they were doing a technical refi after closing. These days, it truly is hovering around 70%.”
Though this trend is prevalent in major cities, cash-only offers are increasing nationwide. The National Realtors Association found that as of January 2024, 32% of house sales are in all cash.
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Given the strengthened market demand and that one in three (29%) home buyers are single, it’s easy to see the appeal of sharing the pricetag with somebody you suspect.
Serhant explains the most up-to-date interest in co-buying homes among younger customers.
“If you happen to have a major collection of money, the housing market goes to favor you, albeit unfairly,” he explained. “We're starting to see younger buyers coming into the fold and co-purchasing. Should you would seek advice from me about people co-purchasing ten years ago, even three years ago, I would have said that it be an exceedingly demanding thing to do. Now it’s changing into more common.” Shutterstock
Co-purchasing homes is helping younger buyers build wealth
Despite a tough market, Serhant unpacks how co-purchasing a house provides pathways to building wealth for the younger generation.
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“You're going to notice two kids taking a have a look at rents, and that they're saying, ‘Okay, rents are going up three% to 10% a year — let's go and buy something together as a replacement.”
“Home ownership is a pathway to wealth, specifically in the U. S.,” he continued. “It always has been, and it be the reason now not going to alter. If buyers can get a perfect deal by pooling their cash together in place of being roommates on a rental, they could possibly be roommates on a house they purchase together.”
”There are different legal structures in place that make co-buying palatable to each person, so we're seeing that a growing collection of. It truly is picking up a bit in New York City, even condos with strict boards and regulations.”
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