Money Management

A recession is always coming, it’s just a matter of time. Read on to find out what could happen to home sales and interest rates next year. 

Nearly every major company and organization is predicting whether a recession is around the corner. And now it’s Fannie Mae’s turn.

The government-sponsored mortgage financing company said recently that despite decelerating inflation, the company expects a mild recession next year. And the result could have a significant impact on the housing market.

Home sales could bottom in 2024

The Fannie Mae Economic and Strategic Research (ESR) Group noted recently that a slowing economy, paired with high interest rates, could result in fewer sales of existing homes.

“With mortgage rates having previously neared the 8 percent mark, the ESR Group expects existing home sales to decline further in the near term but bottom out in early 2024.”

Mortgage interest rates have retreated a bit since Fannie Mae released its prediction a few weeks ago, but the group still expects home sales to decline in 2024 and then to rebound slowly.

What’s unclear is whether declining home sales will lead to falling home prices. Home prices have increased significantly over the past three years, with the median home price rising 27.7% per the Federal Reserve Bank of St. Louis’ data.

Interest rates could fall next year

Even if a recession doesn’t come in 2024, Fannie Mae has some good news for first-time buyers waiting for interest rates to come down.

“Regardless of whether the economy manages a soft landing or enters a mild recession, the ESR Group forecasts mortgage rates in 2024 to retreat from their recent highs and average 6.8 percent by the fourth quarter,” the company said in a statement.

And Fannie Mae isn’t the only one predicting that rates will fall. The Mortgage Bankers Association said recently that mortgage rates could fall to 5.5% by the end of 2025.

There’s no guarantee that mortgage rates will fall in 2024, but if a recession comes, the Federal Reserve may be more inclined to cut the federal funds rate, which could spur mortgage interest rates to retreat.

Focus on what you can control

I’m personally keeping a close eye on the housing market because I’d like to buy a home relatively soon. While I’ve seen home prices decrease slightly in neighborhoods I’m interested in, I still haven’t seen many houses worth the price sellers are asking.

And I’m not alone in my thinking. Many potential buyers are getting cold feet and are backing out of deals. The percentage of pending home sales that fell out of contract reached 16.3% in September, according to Redin, the highest they’ve been in nearly a year.

Whether you’re getting cold feet or aren’t even dipping your toes in the housing market right now, focus on the following moves to get yourself in the best possible financial position for when you’re ready:

Save for a down payment: In many cases, you won’t need to save 20% of the home’s price for a down payment, but you will have to put some money toward the purchase. For example, some FHA lenders offer down payments as low as 3.5%.Pay off debt: The lower your debt-to-income ratio when applying for a mortgage, the better your chances of getting a loan and potentially receiving a lower interest rate. This is why paying off your credit cards, or at least considerably lowering the amount you owe, can be a great move before applying for a mortgage.Talk to more than one lender: Shopping around for mortgage lenders may seem overwhelming, but talking to multiple mortgage lenders could help you get the best deal. Thankfully, comparison shopping can be done online.

Lowering your debt, saving for a down payment, and finding the best mortgage lender for you will all go a long way toward getting you ready to buy a home in 2024, no matter which recession prediction turns out to be right.

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The price of greeting cards has gotten out of control, with basic grocery store Hallmark cards running $3 to $5 a pop. Here’s how to cut that cost in half. 

Now, I’m pretty financially savvy; I know stuff. But even I am occasionally shocked by how expensive some things have gotten.

For instance, have you shopped for a greeting card lately? If you’ve already been out looking for this year’s Christmas cards, you’ve probably seen the same thing I have: Those things have gotten expensive!

I kid you not, I saw a card that cost nearly $20! Granted, it was fancy. The card had a lot of cut-outs and I think it lit up. But even the regular, non-luminescent cards were $3 to $5.

Well, as I started with: I know things. And I know that I don’t have to pay anywhere near that price for holiday cards.

Dollar store cards offer the same sentiment at half the price

For many years, I have gotten nearly every greeting, thank you, and holiday card from my local dollar store. That’s because I can get them for less than half the price of those expensive grocery store cards.

Your dollar store may offer a few different card options, ranging from individual cards (meaning you can pick each card) to boxes of cards (typically multiple cards of the same or similar simple design, such as a box of Christmas cards). Here’s how I break them down:

Fancy cards ($1.25 each): There is a good chance the card will have glitter, ribbon, or some other kind of add-on.Simple cards (two for $1.25): The cardstock is a little thinner, and there won’t be extras like glitter, but the sentiments are nice, and some of the “funny” cards are actually funny.Boxed cards (10-12 for $1.25): These are very basic Christmas cards that come in sets of 10 or 12, depending on the store. Nothing fancy, probably blank or very simple message inside. Definitely needs a little zhuzhing — or at least some sentiment — to make them pop, but cute enough I certainly wouldn’t thumb my nose at one.Specialty cards (up to $1.25 each): If you’re giving a monetary gift, you can find special greeting cards with slots to hold cash or a gift card. Prices vary based on the specific style; I saw simple cards that were priced at eight for $1.25, and fancier ones that cost $1.25 each.

Can’t find a card at the dollar store that truly expresses your deepest holiday feelings? You can always fall back on the money-savers favorite: DIY.

Don’t underestimate DIY appeal

Alright, so this may sound cheesy, but I would 100% prefer a homemade card from my partner to anything they might buy from the Hallmark store. And I’m certain I’m not the only person who feels that way.

Making your own holiday cards can range in cost, but it could possibly be completely free if you (like me) already have tons of crafting and art supplies ready to avalanche out of the closet. Heck, this is a great way to use up extra bits of ribbon or cardstock from the offcuts bin.

Even if you need to buy some supplies, you can make a ton of carefully crafted custom Christmas cards with that same $5 or $10 you’d spend on a fancier card from the grocery store.

If the very idea of creating a card from scratch makes you nervous, don’t worry! For one thing, it’s way more about the sentiment than the looks. As long as you write something heartfelt inside, the recipient won’t mind wavy edges or slanted script.

And if you need some ideas, a simple internet search for “easy DIY Christmas cards” (or similar) will probably give you oodles of inspiration.

Saving hundreds on everything holiday

Regardless of which way you go on your Christmas cards, you can save on everything holiday this season with credit cards. Specifically, opening a new rewards credit card so you can earn a welcome bonus.

Some of the best welcome bonus offers are for $200 cash back when you spend just $500 on your new card. Considering the average participant is expected to spend $875 this year on the holidays anyway, that’s an easy enough ask to meet. And $200 cash back on $875 is more than 22% back! Happy Holidays, indeed.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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It’s possible to lower your costs when celebrating Chanukkah without giving up any fun. Here’s how to keep the holiday magic on a budget. 

When you have a holiday like Chanukkah that lasts eight nights, you might spend a lot of money when celebrating it. But believe it or not, it’s possible to celebrate Chanukkah from start to finish without racking up a giant credit card tab. Here’s how you can save money while enjoying the holiday to the fullest.

1. Make some of your presents

It’s customary to give out gifts on Chanukkah, and some families like to exchange gifts every single night. If you’re going this route, it’s a good idea to swap some store-bought gifts with homemade items.

Instead of a toy or gadget, you might give your child the gift of their favorite chocolate cake or sugar cookies. Similarly, for your spouse, instead of yet another sweater or polo shirt, give the gift of cooking their favorite meal. Or, give the gift of taking over the housework for a week so they don’t have to spend their spare time cleaning.

Homemade gifts can go a long way. And some might not even cost you a dime. Also, don’t be afraid to encourage your kids to offer up homemade gifts for one another. You could, for example, have an older sibling give the younger one the gift of homework help for a week.

2. Choose family time and experiences over gifts

When you have a holiday that’s eight days long, you have several opportunities to do fun things together as a family to celebrate. So swap a few nights of gifts with family time instead.

Have a movie marathon night where you’re generous with your kids’ popcorn refills. Go for a weekend Chanukkah hike and treat your kids to a warm hot chocolate at home afterward. Or, decide that you’re going to spend one night volunteering at your local temple. Looking back, these are experiences your kids are more likely to remember than the specific gifts they received.

3. Book your travel strategically

You may need to travel to celebrate Chanukkah with your family. But since the holiday is more than a week long, you have some leeway when it comes to booking a flight.

If you work remotely and have the flexibility to leave town whenever you want, price different options to see what makes the most sense financially. And if there’s a group of you traveling to the same destination for the holiday, see about splitting the cost of a rental car and driving if doing so is feasible — meaning, you’re not looking at too long a distance and you can swing the time off of work.

TransUnion reports that more than 50% of Americans plan to spend over $500 on holiday shopping this year. You may be able to get away with spending much less if you set priorities this Chanukkah and take steps to make the cost of getting out to see family less expensive.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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The affordability crisis in the housing market can be a significant hurdle for potential home buyers. Discover the reasons to still buy a home next year. 

For many of us, a home is the biggest purchase we will make in our entire lives. Even at the best of times, it can feel as if you’re taking a big leap into the unknown. Right now, that’s compounded by high mortgage rates, house prices that haven’t dropped from their pandemic surge, fears of a housing crash, and economic uncertainty. Put simply, it’s scary.

If you think too hard, your property buying dreams can quickly morph into something more akin to A Nightmare on Elm Street. The average monthly mortgage payment reached a high of $2,739 in October, according to Redfin data. At the time, the property specialists pointed out, “The typical buyer needs to earn 15% more than they did a year ago — and wages are only up 5%.”

Buying a home is certainly more challenging than it was a few years ago. But that doesn’t make it a bad idea in every scenario. Here are three reasons why buying a house could make sense in 2024.

1. A home can be more than an investment

Money is important, and if you aren’t confident you can make your monthly mortgage payments, now’s not the time to buy property. But if you’ve got cash saved for a down payment and you have the rest of your financial ducks in a row, don’t dismiss the emotional value of owning your own home. Particularly if you plan to stay for five years or more.

A friend of mine told me recently that she plans to buy next year, no matter what happens to the market. She’s tired of renting and wants to put down roots — even if it means braving the affordability crisis. She and her partner have been saving for years and they want to get a foot on the property ladder. I can relate. I rented for over 20 years and it can get tiring to pack up every couple years. There’s also something special about remodeling your space the way you want it.

We are all different. Your new home hopes may revolve around kids, pets, your career, or a desire to be in one place. But it’s good to recognize it is more than a financial investment. Ultimately, if you’ve always dreamed of having your very own Santa grotto in the basement, owning means you won’t have to sell your landlord on the benefits of elves and reindeer.

2. We don’t know what will happen

It is almost impossible to predict what will happen to the housing market in the coming years. If you’re trying to time the market and buy at exactly the right moment, you could wind up waiting on the sidelines and never jumping in. That would mean you lose time when you could be building equity in your own place.

Even so, it’s difficult to see beyond the current mortgage rates. Particularly as many experts think they’ll drop in 2024. The Mortgage Bankers Association predicts rates could fall to 6.1% by the end of next year. Redfin estimates rates could fall from 7.3% in the fourth quarter of 2023 to 6.6% the following year.

Let’s say you’re buying a $400,000 home with a 20% down payment. Our mortgage calculator shows how a fall from 7.3% to 6.1% might impact your monthly costs and total interest payments for a 30-year fixed-rate mortgage. Waiting until rates fall to 6.1% could save you almost $100,000 over the course of the loan.

Unfortunately, many expert predictions for 2023 did not pan out. And changes in one aspect of home buying can impact others. What if rates don’t fall? They might still go up. Or the fall in rates could trigger a flood of buyers. In that scenario, rates could drop slightly only to have the savings wiped out by increased property costs. With so many moving parts, sometimes there is a benefit to taking the leap.

3. You could refinance if rates fall

Refinancing is not a magic bullet that solves all home-buying quandaries. Nonetheless, it can be reassuring to know that you don’t have to stick with an interest rate of over 7% for the next 30 years.

As we saw from the predictions above, rates could fall in 2024. The Federal Reserve may lower interest rates if the economy slows and inflation comes back under control. If it does, you may be able to refinance to a lower interest rate. If you have a fixed-rate mortgage and rates rise, which is also not an impossible proposition, your rate will be locked in.

There are some important caveats here. Firstly, it is extremely unlikely that we will go back to the pandemic-era rates of under 3%. Looking back at historical mortgage rates, those were actually more of an anomaly than the rates we see now. Second, if housing prices drop considerably, refinancing could be a challenge if you wind up owing more than your home is worth.

Thirdly, when you refinance a mortgage, you will have to pay closing costs of between 2% to 6% of the loan. That’s not insignificant. It means the cost of refinancing a $320,000 loan could be between $6,400 and $19,200. Even so, if it lowers your monthly payments or significantly cuts the amount of interest you will pay in total, it could be worth it.

Key takeaway

Buying a home is a big decision and the current high costs put it out of reach for many of us. However, if you’re ready to buy, know that there will never be a perfect time. If you have enough saved for a down payment, your emergency fund is well-stocked, and you’re confident you can maintain your income, don’t put too much weight on the doom-mongering headlines. Economic predictions matter, but your personal situation is more important.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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