It’s That Time of Year… Time for My 2024 Predictions!
You can’t write about the economy and interest rates without having predictions for the year, so here we go!
Oil Prices: I believe we will continue to see oil prices fall during the year as demand for oil will continue to fall due to lower demand. i.e. the continued growth of electric vehicles and solar power. Look for gas prices at the pump to fall most likely under $2.25 per gallon by this fall. This drop in oil prices will help inflation to continue moving towards the Federal Reserves magic 2% inflation mark.
Unemployment: The Federal Reserve is predicting that unemployment will only rise to 4.1% from its current mark of 3.7%. While I think this would be very good for the overall health of our economy, the bottom line is that we are in a deeper recession than the Federal Reserve would like to admit, and I believe we will see the unemployment rate rise to close to 4.5% by year-end. The higher unemployment rises, the lower mortgage rates should move.
Home Prices: We pretty much hit this prediction on the nose last year calling for a rise in housing prices by about 5%. I don’t think this will change in 2024, as we still have an inventory issue and new home construction is not keeping up with demand. The more interesting part is that rental property/apartment construction is booming, which is bringing apartment rents down notably and creating more economical options to folks that are 35 and under. Apartment rents have fallen by close to 10% over the past 12 months as supply is close to keeping up with demand. With all of these factors, I believe housing prices in Metro ATL will once again rise by about 5% this year, on average.
Inflation: Depending on how you calculate our current inflation rate, we may already be very close to the Federal Reserve’s 2% target inflation rate. Since I am pretty sure they will not change how they calculate this number, I believe we will hit their projected target of 2% by a mid-summer time frame. The combination of higher unemployment rates, lower producer prices, and an overall notable slow down in our economy will drive inflation to their target and mortgage rates lower.
Fed Cuts and Mortgage Rates: Many are predicting that the Federal Reserve will have 3 rate cuts this year for a total of about .75% lower in the FED Funds rate. I believe that this prediction is very conservative, and I believe that the economy will be worse overall than they have planned due to the slowing in housing and a population that is overextended in credit card and overall consumer debt. We may see as many as 6 moves (possibly 1.5% lower in Fed Funds) over the year but they will most likely not start any cuts until late spring of this year. If I am correct in this prediction, look for mortgage rates to breach below 6% by this summer and may settle closer to 5.5% or lower by the end of the year.
Housing Sales: I have mentioned several times that a mortgage rate below 6% will most likely spark home purchases in the Metro ATL area. We have seen it happen several times, including this time last year when we were hovering in the 6% mortgage range. I really believe we need to see mortgage rates get below the 6% mark or at least hover in the low 6% range by this spring. Once we can breach below 6%, we will see housing sales pick up in metro ATL, and depending on when we hit the 6% or lower mark (notice I said when), we could see housing sales pick up as much as 10% as compared to 2023.
Overall, I believe we should have a better year for home sales in 2024 as compared to 2023. While I do believe we will see notably lower rates in 2024, I hate to say this, but I highly doubt we will revisit a 4% “handle” on mortgages in 2024. I hope I am wrong on this prediction.
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!
Blog post date: Thursday, January 18, 2024
