As summer 2024 approaches, potential homebuyers and sellers are closely monitoring mortgage interest rates, which have seen a significant rise over the past few years. This increase has led to a slowdown in homebuyer demand and a reduction in home sales activity, which has now reached its lowest level since the Great Financial Crisis. This article will explore expert predictions for mortgage rates this summer and what it means for those considering buying or selling a home.
The Impact of Rising Mortgage Rates
The rise in mortgage rates has had a profound impact on the housing market. According to Dr. Selma Hepp, Chief Economist at CoreLogic, the higher cost of homeownership has led to a notable drop in homebuyer demand. Additionally, many potential sellers have been reluctant to list their homes, unwilling to give up the lower interest rates and mortgage payments they currently enjoy. This combination of reduced demand and a low supply of homes has slowed down the housing market considerably.
In 2021, mortgage rates were at historic lows, with interest rates between 2% and 3%. These rock-bottom rates fueled a homebuying frenzy during the pandemic. However, rates have since climbed, with the average rate for a 30-year conventional mortgage hovering around 7% as of spring 2024. While this is slightly lower than the nearly 8% peak seen in October 2023, it is still significantly higher than the rates of just a few years ago.
Predictions for Mortgage Rates in Summer 2024
Experts like Dr. Hepp and Tai Christensen, President of Arrive Home, agree that the ultra-low mortgage rates of 2021 are unlikely to return anytime soon. Dr. Hepp states that a 3% mortgage rate is now a “distant memory” and suggests that rates are unlikely to drop that low again barring a significant adverse economic event, such as a recession, which is not expected in the near term. Christensen echoes this sentiment, noting that while mortgage rates could eventually drop back down to 3%, it is unlikely to happen in the foreseeable future.
Looking ahead to the summer of 2024, experts predict that mortgage rates will remain elevated, potentially maintaining their current levels or experiencing only slight decreases. Inflation continues to be a driving factor, with the Federal Reserve maintaining a cautious stance on rate cuts. If inflation shows signs of significant decline, the Fed might lower the federal funds rate, which could, in turn, lead to a reduction in mortgage rates. However, this is largely speculative, and many experts believe that rates will stay high through the summer months.
The Effect on the Housing Market
Traditionally, spring and summer are peak seasons for homebuying, with favorable weather and the desire for families to settle into new homes before the school year begins. However, higher interest rates could dampen the usual summer housing market activity. Christensen points out that while these seasons are typically popular for home purchases, buyers may face increased competition and potentially higher prices due to the limited supply of homes on the market.
The average sale price of homes in the first quarter of 2024 was $513,100, according to the Federal Reserve Bank of St. Louis. With both higher mortgage rates and home prices, some buyers may find it less appealing to enter the market this summer. Dr. Hepp notes that while the housing market is not considered “hot” due to the cooling effects of high mortgage rates, there are still more buyers than there are homes available, which continues to drive up prices.
Should You Buy a Home Now or Wait?
With mortgage rates more than double what they were just a few years ago, many prospective homebuyers are hesitant to take out mortgages right now. However, this doesn’t necessarily mean you should wait to buy. For those who are well-prepared with a significant down payment, excellent credit, and a clear plan for long-term homeownership, buying now could still be a wise decision.
Dr. Hepp suggests that mortgage rates might start to move lower by the end of the year, depending on overall inflation trends and the Federal Reserve’s actions. If the Fed becomes confident in the persistence of disinflation, it could lower the federal funds rate, leading to lower mortgage rates. In this scenario, those who purchase homes now could refinance later to take advantage of the lower rates.
Christensen also advises that buyers consider purchasing during less popular times of the year, such as fall or winter, when there may be less competition and more favorable terms available. However, if you find the perfect home now and are financially prepared, it may be worth securing the property even with the current higher rates, as you have the option to refinance in the future if rates decline.
Conclusion
Ultimately, the decision to buy a home now or wait depends on individual circumstances and market conditions. While mortgage rates are expected to remain high through the summer of 2024, those who are prepared and find the right home may still benefit from purchasing now. For others, waiting for potential rate decreases later in the year could be a more strategic move. In either case, staying informed about market trends and working with a trusted mortgage advisor can help you make the best decision for your financial situation.
Link to the original article: https://www.cbsnews.com/news/mortgage-interest-rate-forecast-for-summer-2024-everything-experts-predict/