2023 saw record-breaking home prices and mortgage rates higher than we've experienced in over 20 years. Mix those factors with a historically low number of houses for sale and you've got a cocktail househunters found hard to swallow. Affordability is a huge factor in buying a home in Monroe County and the question is when will the mortgage rates drop so home buyers can catch a break?
Here's what the experts are predicting for 2024
DISCLAIMER: No one has a crystal ball and you should take any forecast with a massive grain of salt. I am talking about the boujee Pink Himalayan salt, not your grandma's table salt. Case in point, last year's predictions were wildly off-base. Which is to say that you shouldn't build your life or homebuying timeline around these numbers. Now that I've addressed that...
The good news is most major forecasts expect rates to fall this year.
| Q1 2024 | Q2 2024 | Q3 2024 | Q4 2024 |
6.9% | 6.6% | 6.3% | 6.1% | |
6.5% | 6.3% | 6.1% | 5.9% | |
6.8% | 6.6% | 6.3% | 6.1% | |
6.8% | 6.6% | 6.3% | 6.05% |
What The Experts Are Saying About 2024 Mortgage Rates
Mortgage Bankers Association | Decline to 6.1%
"We expect that this path for monetary policy should support further declines in mortgage rates, coming just in time for the spring housing market. We are forecasting modest growth in new and existing home sales in 2024, supporting growth in purchase originations, following an extraordinarily slow 2023." - Mortgage Finance Forecast
NAR: Decline to 6.1%
"I believe we've already reached the peak in terms of interest rates." - Lawrence Yun, chief economist at NAR (November 2023)
Fannie Mae: Decline to 5.8%
"Inflation’s decline and the resultant Fed pivot to signaling future rate cuts rates lead us to believe that home sales and mortgage originations likely bottomed out in the second half of 2023 and that a gradual improvement is now underway [...] We expect mortgage rates to dip below 6% by year-end 2024 and for homebuilders to continue to add new supply, both of which should aid affordability." - Doug Duncan, Fannie Mae's senior vice president and chief economist
Wells Fargo: Decline to 6%
"The residential sector looks to be improving as mortgage rates march lower. ... On balance, mortgage purchase applications have been trending modestly higher over the past several months, which suggests that lower financing costs are pulling homebuyers back off the sidelines. Although we anticipate mortgage rates to gradually decline over the forecast horizon, debt costs are likely to remain elevated relative to recent norms, which should keep the pace of home sales subdued." - U.S. Economic Outlook
Why are mortgage rates high?
At the heart of mortgage rate determination lies the ebb and flow of the economy. Several key economic indicators play a pivotal role in influencing mortgage rates:
Federal Reserve Policy: The Federal Reserve, through its monetary policy decisions, primarily sets the tone for mortgage rates. Changes in the federal funds rate, which is the interest rate at which banks lend money to each other overnight, can have a ripple effect on mortgage rates. When the Fed raises rates to curb inflation, mortgage rates tend to follow suit, and vice versa.
Inflation: Mortgage rates and inflation share an intricate dance. Lenders factor in inflation expectations when setting mortgage rates. Inflation erodes the purchasing power of future dollars, so lenders typically demand higher interest rates to compensate for this loss.
Bond Market Movements: Mortgage-backed securities (MBS), which are bundles of mortgages sold to investors, are closely tied to the bond market. When bond prices rise, yields fall, leading to lower mortgage rates, and conversely, when bond prices fall, mortgage rates rise.
What to expect with inflation in 2024
In 2023, rates spiked in response to rising inflation and the Fed's aggressive hiking of the federal funds rate. So, all eyes are on what the Federal Reserve plans to do in 2024, and all signs point to them pulling back gradually.
Boston Fed president Susan Collins just said in a speech at the Tuck School of Business at Dartmouth that "while total inflation has come down significantly from its recent peak, it remains elevated, and progress returning it sustainably to our 2% target will likely continue to be bumpy [...] I believe it will likely become appropriate to begin easing policy later this year."
