Mortgage Rate Outlook for 2024. When Will Rates Drop?

Unless you’ve been living under a rock since April of 2020, it should come as no surprise that the COVID-19 lockdowns played a major role in the inflating prices of real estate. Home inventory was at a historic low and many areas across the country experienced price hikes between 25%-40% over a 2-year period. Here in the Triangle Region of North Carolina, that peak hit ~ 36% around November 2023.  During that same period of time, home interest rates hit historic lows ranging between of 2.5% - 3% which, to date, the lowest rates ever seen for buying or refinancing a home. The caveat, however, was that while borrowing money to purchase a home was low, securing a property to actually purchase proved to be a nearly impossible feat. Due to ultra-low inventory, homebuyers were forced into a dog-eat-dog bid war in which buyers were forced to bring tens of thousands of dollars above asking price to simply secure a contract on a home. In many cases, buyers were forced to rent due to limited cash reserves in combination with the non-existent inventory of homes.

How bad was the housing inventory? Here in Wake County, NC the inventory showed a 50% reduction from September 2020 – September 2021. However, areas like Cary, Apex, and Morrisville saw reductions of ~67% reduction in that same period and an 83% reduction in inventory when compared to September of 2019. The real estate market was in complete gridlock and wouldn’t see relief until Q2 of 2022 when inventory increased and slowly climbing interest rates quelled the inflated prices of real estate. By the time Q4 2022 rolled around, inventory was up, and prices had stabilized. However, the Fed continued increasing rates through Q4 of 2023 topping off around 8%. This effectively swung the pendulum the other direction once again taking the housing market inventory. Since then, everyone has been asking, when will rates fall? Is now a good time to sell?

According to Fannie Mae, rates are expected to be below 6% by Q4 of 2024 (1). The Wall Street Journal appears to have a similar prediction citing ranges between 5.8% and 6.6% (2). It’s believed that the Fed will begin this process around May but either way, homebuyers should see some relief from the current rates of 7.5% - 8%. Until then, if you need to buy a home, you should take advantage of buydown programs that many lenders are providing, they can save you hundreds per month until you’re able to refinance.  

Classick, Matthew. “Mortgage Rates Expected to Dip below 6 Percent in 2024, Boosting Home Sales.” Fannie Mae, 18 Jan. 2024, www.fanniemae.com/newsroom/fannie-mae-news/mortgage-rates-expected-dip-below-6-percent-2024-boosting-home-sales.

Yale, Aly J. “Mortgage Rates Could Drop in 2024—But How Far?” Buy Side from WSJ, 8 Feb. 2024, www.wsj.com/buyside/personal-finance/will-mortgage-rates-go-down-in-2024-predictions-16fffcaa.

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