Mortgage Rates Expected to Drop Further in 2024

Strategic Insights -

As the economy continues to normalize, mortgage rates are expected to come down further, making it easier for homebuyers to get into a home affordably. Recent drops in 30-year mortgage rates below 6% for the first time since early 2023, according to Zillow data, are a result of cooling economic data and expectations that the Federal Reserve will start lowering the federal funds rate later this month. However, it's unclear how quickly rates will drop and where they might ultimately end up. One key area to watch is the labor market, with unexpected weakening potentially leading to more substantial drops in mortgage rates.

Key Takeaways:

  • Mortgage rates have recently dropped below 6% for the first time since early 2023, according to Zillow data.
  • The Federal Reserve is expected to start lowering the federal funds rate later this month, which could lead to further drops in mortgage rates.
  • The labor market is a key area to watch, with unexpected weakening potentially leading to more substantial drops in mortgage rates.
  • Homebuyers may have an opportunity to get into a home affordably as mortgage rates drop further.
  • The economy is expected to normalize in 2024, leading to a decrease in mortgage rates.
  • Fixed-rate mortgages may be a good choice for borrowers who want stability, as they offer fixed rates for the entire life of the loan.
  • Adjustable-rate mortgages (ARMs) may be a good choice for borrowers who want lower rates initially, but they come with the risk of rate increases after the introductory period.
  • The Federal Reserve's policy on the federal funds rate will have a significant impact on mortgage rates.

Statistics:

  • 30-year mortgage rates dropped below 6% for the first time since early 2023, according to Zillow data.
  • The Consumer Price Index rose by 2.9% in the last 12 months, a significant slowdown compared to when it peaked at 9.1% in 2022.
  • Traders are betting that the Federal Reserve will slash rates by 100 basis points by the end of the year, with more cuts expected in 2025 as well.
  • Fannie Mae researchers expect home prices to increase 6.1% in 2024, while the Mortgage Bankers Association expects a 4.1% increase in 2024.

Sources:

  • Zillow: ("https://www.zillow.com") provides data on 30-year mortgage rates
  • Business Insider: ("https://www.businessinsider.com/personal-finance/mortgages/30-year-mortgage-rates") article on 30-year mortgage rates
  • Fannie Mae: ("https://www.fanniemae.com/media/53061/display") research on home prices
  • Mortgage Bankers Association: ("https://www.mba.org/news-and-research/forecasts-and-commentary") forecast on home prices
  • CME Group: ("https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html") FedWatch tool for tracking Federal Reserve policy.