As the Federal Reserve persists in its efforts to combat inflation, there is a glimmer of hope on the horizon for prospective homebuyers regarding mortgage rates in the coming year. Economists are forecasting a potential easing of mortgage rates, currently hovering at a 22-year high of 5.25% to 5.50%. The outlook suggests rates could land anywhere between 5.7% and 6.8% in 2024, contingent on the pace of inflation cooling and the Federal Reserve’s ability to conclude one of its most aggressive rate hike campaigns in decades.
The modest improvement in rates brings some relief for those on the sidelines, yet challenges of affordability persist for most buyers in the market. Danielle Hale, chief economist at Realtor.com, expressed optimism during the National Association of Realtors (NAR) 2024 Forecast Summit, stating,
“We expect the mortgage rates to turn the corner. In fact, they have been dropping pretty swiftly in recent weeks, [and] we expect that decline to continue as we move into 2024.”
Despite this positive sentiment, there is acknowledgment that the turnaround in affordability may be incremental. Lawrence Yun, chief economist of the National Association of Realtors, emphasized,
“We’re not going to see a big turnaround, but I do think we’re going to see a baby step in the right direction.”
The Federal Reserve’s aggressive stance against inflation, marked by 11 short-term benchmark interest rate hikes since March 2022, has placed upward pressure on mortgage rates. The current rate stands as the highest in 22 years. However, recent progress in controlling inflation has led experts to speculate about the Fed potentially concluding its rigorous rate hike campaign.
Fed Chair Jerome Powell, in a recent conference call, hinted at an expected federal funds rate of 4.6% by the end of 2024, providing a ray of optimism for market observers. The central bank also indicated an anticipation of three rate cuts in the coming year.
While the mortgage rates have improved somewhat, remaining at their highest level in over two decades, the market remains cautiously optimistic about a gradual decline into 2024, with rates potentially settling around 6.5% by year-end.
The evolving economic landscape keeps forecasts varied, underscoring the uncertainty that lingers in the housing market as the Federal Reserve works to cool down inflation in the new year.
Read More About Real Estate By Clicking Below!!
