2024 Mortgage Rate Predictions

What will interest rates do in 2024? 

Oh this is such a complicated question. Numerous factors influence mortgage interest rates, especially during turbulent times characterized by global conflicts and a presidential election here in the States. Asking ten people might yield twelve different opinions, underscoring the uncertainty surrounding future rates. It’s crucial to consider the myriad factors that influence mortgage rates before delving into predictions.

The overall economic condition plays a significant role in determining interest rates, among other factors such as new housing starts, Federal Reserve interest rates, the political landscape, and unemployment rates. These elements are interrelated; for instance, interest rates affect new housing starts, political developments can influence interest rates, and employment rates impact all of the above.

Looking into 2024, here’s what some analysts are predicting for 30-year fixed-rate conventional mortgages:

  • Homebuyer.com suggests that mortgage rates could decrease to around 4.25% by summer after the Federal Reserve’s rate hikes ended in 2023, thanks to easing inflation pressures and increased interest in mortgage bonds.
  • The Mortgage Reports offers a range of predictions, with some experts expecting rates to be around 7% or slightly lower.
  • Goldman Sachs forecasts that mortgage rates will remain above 7% in 2024, due to a steeper yield curve and Treasury yield volatility.
  • Mortgage Bankers Association anticipates rates sliding to 4.9%.
  • Morningstar projects an average rate of 5.0%.
  • Fannie Mae expects mortgage rates to average 6.1%.

A significant influence on these predictions is the expectation that the Fed will lower the federal funds rate this year. Numerous factors will guide their decision. As of early February 2024, the Federal Open Market Committee has set the federal funds rate between 5.25% and 5.50%, with the average 30-year fixed-rate mortgage currently at 7.24%.

Comparing these predictions to the current rate of 7.24% (February 2024) says that all the smart people are predicting a modest to substantive decline in rates this year. (if you consider a 1.0% drop substantive). Again, to offer perspective, we saw a low of 3.22% in 2022, a level unlikely to be revisited in this generation.

Overall, we believe that there will be a modest trend down (some say significant trend down), the current rates reality is expected to persist, influencing both seller (inventory) and buyer (demand) behavior.  One of our new home builder friends said that as long as rates stay high, and inventory of existing homes stays low, then it will feed into a growth in new home sales. We agree. 

As the market adjusts to these new rates we expect that rates will become less of a limiting factor in buying and selling decisions. Inventory is going to pickup (people have to have to have to sell in an increasing number of situations). Overall this adaptation to the new normal is going to gradually diminish the impact of interest rates on the housing market.

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