Several Federal Reserve members (Grinches) have stated that they may not be done hiking rates and that they need to see more data showing that inflation is continuing to go down. While I think their statements are probably the responsible thing to say, the truth is that inflation may be pacing below their 2% benchmark now if you use a 6-month average instead of their 12-month look back. Unemployment will most likely be on the rise for most of 2024. All of this translates to me that the Federal Reserve will most likely start cutting rates as soon as March of this year and that we may see as much as a 2% cut in the Fed Funds rate by this time next year, putting us closer to a 3.5% to 3.75% range on FED Funds but still a far cry from the near 0%, we were several years ago. If we see this sort of FED easing, it should move 30-year fixed-rate mortgages closer to the 5% range and maybe into the high 4% range. I will say that my projection is a little more aggressive than some of the Wall Street Warriors as their consensus is calling for roughly a 1% cut in FED funds starting in May, which would place 30-yr fixed mortgage rates in the high 5% to low 6% range by the end of the year.* Even if they are correct, this is still what I would refer to as a “normal” rate range for mortgages and would still be very good for home sales in 2024. We have already seen an over 1% drop in rates over the past 45 days, which has brought mortgage rates from above 8% to now under 7%. This recent drop in rates has been an early Christmas present for many looking to purchase a new home, as this drop in a $500,000 loan amount might have saved someone over $300 per month!!! As rates continue to fall, look for housing sales to pick up in 2024 due to increased affordability as home prices are projected to only rise slightly with rates coming down…what a wonderful combination. 2024 should be a good year for both resales and new construction.
I hope all of you have a wonderful Holiday Season, and it looks like 2024 should be a good year for real estate sales!!! Please be sure to look for my 2024 forecast next month.
Remember… The BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
Thank you for reading this blog. I hope that the facts and insights I share provide value for you.
If you’d like to allow me to invade your inbox and receive a weekend update from me each week, please provide your name and email address, and I’ll start sending over more facts and insights like you just read, as well as current market rates and news. If you have a topic you would like me to consider covering, please feel free to send it over. Who knows… I may write about it!
*Not an advertisement of rates offered by BankSouth Mortgage. For illustration purposes only.
Blog post date: Thursday, December 21, 2023