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2024 Mortgage Analysis & Outlook

2023 was certainly an interesting year in the mortgage space amid higher interest rates and a challenging lending environment. 

 

With that in mind, I thought it might be helpful to offer an overview of the past year and a look ahead at what may be to come in 2024, in case you’re among those considering the big financial move of new home ownership. 

 

2023 in a Nutshell

 

Higher mortgage interest rates carried over from 2022 into 2023, with the Federal Reserve raising interest rates four times last year. Higher rates resulted in slightly softer single-family home prices (but not everywhere), creating a more favorable environment for buyers in many localized markets. 

 

Fortunately, for would-be borrowers, mortgage interest rates also pulled back from highs as interest rate market sentiment shifted in October of 2023 and into early 2024.

 

Questions remain, however: At the start of the year, the consensus is for interest rates to be lower in 2024 compared to the first three quarters of 2023, but rates have already pulled back substantially from their 2023 highs. Overall, housing affordability for new purchases seems to be improving.

 

Expert Market Predictions into 2024

 

At the start of the year, the average 30-year fixed mortgage rate was hovering near 6.70%, according to Mortgage News Daily, which provides averages from Freddie Mac, Mortgage Bankers Association, and FHFA.

 

Mid to high 6s sure is better than the near 8% levels we saw what seems like the other day in October. Here is what experts see for 2024:

  • Fannie Mae sees an average rate of 6.7% for 30-year fixed-rate mortgages in 2024.

  • Realtor.com predicts 30-year fixed rates averaging 6.8% in 2024. Per their 2024 Housing Market Forecast, “Although mortgage rates are expected to begin to ease, they are expected to exceed 6.5% for the calendar year," the report reads. "This means that the lock-in effect, in which the gap between market mortgage rates and the mortgage rates existing homeowners enjoy on their outstanding mortgage, will remain a factor."

  • The National Association of Realtors forecasts an average rate of 6.3% in 2024.

Overall, we are pretty close to these levels now, and of course, individual rates vary depending on credit, product, and other factors. But if you have been on the sidelines waiting for rates to tick lower, now may be a good time to get prepared.

 

Sellers Have Been Waiting

 

The narrative about sellers has been that many are waiting to sell because they don't want ~8% mortgage rates on their next purchase. Times have changed quickly in this respect, as mortgage interest rates have dropped since October.

 

The result seems to be sellers who are more ready, willing, and able to make concessions to a homebuyer to get a deal done.

 

New Purchases - Buyers Should Focus on the Deal

 

We get it. We all want the lowest possible interest rate. But don't forget to focus on the terms of the deal in front of you! 

 

Sellers have been sitting on inventory for some time now, and as noted above, it seems they are willing to make concessions more readily now in many markets compared to the recent past. 

 

A hypothetical seller may want to close a deal so they can upgrade to a new piece of real estate now that interest rates are lower compared to late 2023.

 

If you are in the market for a new purchase, focus on favorable terms, such as a favorable deposit, concessions after home inspection, closing cost assistance, and home warranties.

 

U.S. Federal Reserve

 

It finally appears that the worst is behind us after two years of a Federal Reserve (Fed) rate hike campaign designed to tame inflation.

 

Expectations in 2024 are for lower rates from the Fed, including three to six rate cuts. Some of this optimism may already be priced into popular mortgage products, hence the decline from the October highs in interest rates.

 

At least at the start of the year, it seems like the Fed will be accommodative, creating a more favorable backdrop for mortgage borrowers in 2024 versus the past couple of years.

 

The Takeaway

 

Mortgage interest rates have pulled back from their October 2023 highs, and single-family housing prices have relaxed in some (but not all) markets. 

 

Market experts forecast 30-year fixed mortgage interest rates to remain at near-present levels in 2024. Compared to recent history, 30- and 15-year mortgage rates in the sixes are still quite favorable. 

 

The present environment could be a good one for sidelined borrowers who have been on the fence waiting for lower rates than last year, while sellers may be ready to get deals done with more concessions and more willingness to listen to offers. 

 

With that overview noted, if you have questions about your overall financial picture and how a new home might fit into that, please do not hesitate to reach out. And of course, if you have other investing questions or needs, Apollo Advising is here to help.

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