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What’s in store for the home loan market in 2024. Explore the forecast and what top experts think may occur in the ever-changing mortgage rate environment.
30-year mortgage rates in 2023 saw some of the highest rates in 20+ years. But where will they go for 2024?
2023 rates slowly rose for the first two quarters, then quickly rose for the third quarter. But at the end of October the trend changed and the rates made up nearly all of the losses for the year.
At the time of writing this article a couple weeks before Christmas 2023 interest rates have been steadily moving down since the end of October. They’re about 1.5% lower than where they were at the peak of rates almost averaging 8%.
Right now all indications show this is a strong possibility. Rates on homes typically follow inflation. As inflation goes up, typically so do home rates.
Inflation data over the last part of 2023 has been very promising and is nearing it’s target goal of 2% inflation per year. Rates have started to respond in kind to this news and it seems likely this lower rate trend that started at the end of October 2023 could continue well into 2024.
Rates and the economy work hand in hand. The economy is complex and is moved by many parts. Inflation, recessions, unemployment, Geopolitics, and many other unforeseen events can play a big role and can change the rate environment in a big way similar to how the Covid pandemic did.
So even though 2024 seems to be looking in the right direction based on indicators, it’s not a guarantee that one of these major pieces could derail the progress made and in turn send rates in the wrong direction.
Many top experts and professionals in the industry expect rates in 2024 to be lower than they were in 2023. But how low could they get? A common estimate is rates in the low 5% to mid 6% range at some point in the summer of 2024.
One major factor is the Federal Reserve’s “Fed Funds Rate” that they change as a lever to combat inflation and slow the economy. 2023 saw what looks to be the end of them raising this rate and the voting members are all forecasting cuts to this by 0.5 to 1 percentage point in 2024. To put that in perspective, they raised this rate from 0.25% up to today’s rate of 5.5%.
How quickly they decide to move this rate down all depends on the economy in real-time. Moving it down too fast or too slow can have disastrous effects for people and businesses, which is why predicting interest rates is at best cautiously optimistic.
When rates are low more people can afford homes since the payments are much lower. This causes more demand for homes as more people are fighting for the same number of homes. Bidding wars where paying tens of thousands over the listing price for a home is common in this environment and typically causes home prices soar, and buyers to become frustrated (known as buyer fatigue).
When rates go up, those same people either cannot afford a house any longer and must wait for better rates, or sit on the sidelines because they don’t want to pay that much for a monthly payment.
The benefit is competition for homes is significantly lower and home prices often come down. So if someone can still afford it, a high-rate environment is a great opportunity to get the home you want, with little competition, for less money than before, and with sellers helping pay your payments for the first couple of years (through seller paid by-downs and concessions).
Each year we see new household formations. These are people years prior had lived with a parent, relative, or friend and have now decided to branch out on their own. A lot of these people sat out 2023 due to high prices and rent costs even though they were ready. Combine them with the others that wanted to move but decided to wait for lower rates and you see a large group of people waiting on the sidelines. When the rates do come down, it’s very likely that competition and demand will be higher than ever and home prices will climb rapidly.
So if you can, buying now can save you time, money, and major headaches in the future. You’ll pay more monthly today, but when rates come back down, you can always refinance into the lower payments and get the best of both worlds.
The first step is to fill out a loan application and talk to a lender. The lender can then pull your credit to see everything needed to guide you to the right loan program for you. Our pros are experts at finding the perfect fit for your financial needs and helping with a roadmap to home ownership today.
FHA loans are a wonderful product for someone buying a primary residence. Most people will need at least a 580 credit score, a steady income that can support the house payment and other monthly debts, as well as 3.5% down payment. Some people may qualify for down payment assistance that can help with the 3.5% down payment and other closing costs.
There are several eligibility guidelines. First, you must have served 90 consecutive days of active service during the war. Alternatively, you must have served 181 days of active service during peacetime. Having served six years of service in the national guard’s reserve is a valid option too. Further, spouses of service members who died in the line of duty qualify for this loan. VA loans don’t require a down payment and require the person to have enough income to support the house payment, other monthly debts, and still have a residual income remaining. The amount of residual income needed for qualification is based on VA’s residual income chart that is broken down by region.
If you meet the minimum service requirements for a VA home loan then getting qualified for a VA home loan is a breeze. We can help you with what documents you need to provide along with a loan application that will allow us to determine how much house you can afford and what your payment will be.
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