Mortgage Rate Forecast 2024
It has been a roller coaster ride of uncertainty as buyer’s wait out a drop in interest rates. At the beginning of July of 2023, rates were at 6.8%. Those who waited for rates to fall would have been rewarded if they were ready to move by the end of July when they fell to 6.7%.
However, by August 2023 they rose above 7%. At the end of October 2023, rates rose as high at 7.7%. Many buyers may have been feeling like they missed out by not moving forward in July.
2023 Interest Rates
There are several factors that determine interest rate changes. The FED had consistently raised their rate as a way to curb inflation. During the 2022-2023 cycle, they increased rates 11 times to slow inflation but has held their rate steady since July 2023. Mortgage rates adjusted down during that month, but then rose steadily with brief periods of slight adjustments downward.
It wasn’t until January 2024 that rates returned to 6.67%. Lenders watch what the FED is doing and after several months of not raising rates, they finally reduced them to July 2023 numbers. We see market activity tick up slightly each time rates come down.
This is a good example of how waiting for a better interest rate may not be wise. What one might save in a slight interest rate decrease may be lost when the purchase price rises because of competition among buyers.
Today's Interest Rates
In the February FED meeting, the chairman indicated that they would not be raising their rate because inflation had declined to their 2% target. At the same time, they suggested that rate cuts would not come any time soon. They want to see a period of months where inflation doesn’t rise before cutting their rate.
Today, 30-year mortgage rates have fallen from record highs. While they reached approximately 8% in October 2023, they now average 6.63% as of the beginning of February 2024, according to Freddie Mac.
While most economists don’t believe interest rates will fall to the pandemic levels of 2020 and 2021, many believe rates may fall to 6.3% by the end of 2024. Others believe they will stay flat in 2024.
The GDP remains strong and a drop in interest rates may only occur in a weak economy. While rates are currently in the mid 6% range, this may be the best mortgage rate we will see in 2024.
Again, if interest rates were to fall below 6% many more buyers would enter the market. Competition for a limited supply would drive home prices higher.
The best strategy for purchasing a home in 2024 would be to get your finances in order and be ready to move on any slight downward adjustment like we witnessed in 2023. We are seeing many more buyers becoming comfortable with 6% interest rates. Locking in a 5% interest rate may not be possible, even in 2025.
Contact us today for more information about available homes for sale in North Lake Tahoe and Truckee.