In a marginal shift, mortgage rates witnessed a minor uptick this week, with the average rates for 30-year loans inching up from 6.61% to 6.62%, as reported by Freddie Mac on Thursday. Despite a marginal uptick this week, mortgage rates in 2024 are expected to experience continued declines, as industry experts project a positive trajectory for homebuyers.
Since late October, rates have been on a downward trend, plummeting approximately 117 basis points from the 12-month high of 7.79% at the end of October. This decline has considerably enhanced homebuyers’ purchasing power, although concerns loom over a persistent supply shortage that could potentially impede further affordability improvements, especially if lower rates reignite demand.
Jessica Lautz, the National Association of Realtors’ deputy chief economist, cautioned against interpreting weekly fluctuations as indicative of the broader trend. She affirmed, “While mortgage interest rates are expected to overall decline in 2024, minor fluctuations in weekly mortgage interest rates are to be expected.”
Anticipating a surge in demand from those previously priced out of the market, Lautz foresees intensified competition among all-cash homebuyers and first-time buyers in the coming spring.
The Purchase Application Payments Index (PAPI) reported a notable drop in the national median monthly mortgage payment on purchase applications, falling by $62 to $2,137 in November. Edward Seiler, MBA’s associate vice president, emphasized the positive impact on affordability, stating, “MBA expects that affordability conditions will continue to improve as mortgage rates decline.”
However, the current affordability, while better than in previous months, remains lower than a year ago. Mortgage applicants are shelling out $160 more per month, an 8.1% increase, compared to the national median mortgage payment 12 months ago.
Despite this, experts express optimism regarding additional declines in mortgage rates in 2024.With the U.S. economy poised for a soft landing and inflation showing signs of improvement, rates are predicted to potentially drop to around 6% or even lower by the end of the year.
Jacob Channel, LendingTree’s senior economist, expressed confidence in the stability of mortgage rates, saying, “If inflation continues to show signs of improvement and the bond market remains less turbulent than during much of 2023, mortgage rates should at the very least stabilize this year, if not show sustained declines.”
However, housing experts have sounded a warning about the potential impediment to affordability improvement posed by a limited inventory. A shortage of housing supply, coupled with returning demand, could heighten competition in the market.
“Homeowners may still be reticent to move from low-interest-rate mortgages until they are in a situation where a life or job change occurs forcing them to reconsider their living situation,” remarked Lautz.
The total inventory of unsold existing homes, excluding new constructions, dropped 1.7% to 1.13 million units at the end of November, equivalent to 3.5 months of supply. This is considerably lower than the balanced and healthy market benchmark of 6 months.
While there is a possibility of a slight uptick in inventory as more sellers reach their “tipping point,” experts remain cautious. Danielle Hale, Realtor’s chief economist, noted, “We are not going to see a big turnaround, but I do think we are going to see baby steps in the right direction.” The current existing home inventory levels are comparable to the record low in January 2022, signaling ongoing challenges in the real estate market.
In conclusion, the collective analysis suggests that the real estate landscape is poised for dynamic changes, with the prevailing sentiment among experts pointing towards a promising future characterized by favorable mortgage rates in 2024.
Source: Yahoo Finance
