Mortgage Rate Forecast 2024
30 Year (Blue) 15 Year (Green) from Freddie Mac see: https://www.freddiemac.com/pmms
Throughout 2023, buyers were waiting patiently to see if mortgage rates would fall. Over the last two years, mortgage rates climbed from 3.2% in January 2022 to 7.23% in summer 2023. Interest rates appeared to be moving downward from December 2022 at just under 7%, when they fell to 6.14% in January of 2023.
The problem with waiting for better interest rates is that rates have appeared to go up and down. The mortgage industry has reduced rates at times just to spur loan originations. A buyer who didn’t jump on the 6.14% rate in January of 2023 would have been disappointed to see rates climbing to 7.23% by August 2023.
We closed out December 2023 with inflation easing and the FED didn’t raise their rate. The average rate for 30-year fixed-rate mortgages with a conforming loan balance ($726,200 or less) decreased to 6.75%, down from 6.81%. Last week, applications rose 11% as buyers became more comfortable with an interest rate in the 6% range.
The reason rates were so low at the beginning of 2022 was because the FED had reduced their rate to spur economic recovery after the pandemic. Anyone waiting to see if rates will fall below 5% or even 6% may be disappointed.
At the end of 2023, the FED hinted that it may begin cutting rates in 2024. However, the mortgage industry, mirrored by strong stark market activity, already got a jump start on reducing rates. The FED’s target rate has remained between 5.25% and 5.5%. Mortgage companies add to that rate to make a profit.
Will Rates Go Up or Down?
Even if, as some forecasters predict, the FED reduces their rate to 4.6% by the end of 2024, an uptick in buyer activity may keep mortgage rates higher. This also keeps home prices higher.
At the same time, with interest rates higher, there are fewer buyers. Fewer buyers mean home prices may be lower. What you might save in a few points on a mortgage can disappear if the real estate market grows more active.
Forecasters are mixed on whether rates will drop throughout 2024. Many believe the FED is done raising their rate and that is good news for buyers. However, most agree that rates will probably remain in the mid 6% range.
A mortgage rate of 6.81% today, while the market is balanced between a buyer and seller’s market means sellers are more negotiable in accepting offers lower than the list price. As rates fall slightly, more buyers will enter the market, which could shift it back to a seller’s market.
It is important to take all of these considerations into account when determining if it is the right time to buy a home at Lake Tahoe.
Contact me today for information on price reductions and for a list of homes that offer a good value.