What will interest rates do in 2024?

What will interest rates do in 2024?

As the year draws to a close, it's natural to turn our gaze towards the possibilities that 2024 may hold. I've surveyed predictions on mortgage rates from various economists and industry leaders. Reflecting on the past year, dominated by uncontrollable inflation, the narrative for 2024 could pivot towards a potential slowdown in inflation. However, there remains a risk of resurgence, with implications for a rise in mortgage interest rates.

Addressing the general outlook, the consensus among experts is an anticipation of decreasing mortgage rates in 2024—a forecast that mirrors the sentiments of the previous year. Yet, it's crucial to note that such optimism prevailed in 2023, only to be proven inaccurate. The 30-year fixed-rate, contrary to expectations, surged past the 8% mark before recently showing signs of relief.

Looking at the macroeconomic landscape, the Federal Reserve's 11 rate hikes aimed at curbing inflation may have consequences such as weakened economic output and increased unemployment. This could potentially prompt Fed rate cuts as early as March 2024, signaling a shift in the tide. While this doesn't guarantee a parallel movement in mortgage rates, it suggests that the worst might be behind us.

Predictions from Mortgage Bankers Association (MBA) for 2024 forecast a gradual decline in mortgage rates, with projections of 7.1% in the first quarter and a further decrease throughout the year. Notably, their optimism persists despite their overestimation of rate reductions in 2023.

Fannie Mae, in contrast, adopts a more conservative stance, envisioning the 30-year fixed rate hovering around 7% throughout 2024. Their outlook, shaped by a cautious approach, remains to be updated based on recent improvements in mortgage rates.

Freddie Mac, though not providing specific quarterly predictions, anticipates modest reductions in mortgage rates, citing a potential return to the low-6s in 2024. They emphasize the influence of Treasury yields on rate movements and anticipate a rate environment influenced by decreased volatility.

The National Association of Realtors (NAR) projects a decline in mortgage rates through 2024, with expectations for rates to be in the 6.3% range by the fourth quarter. Lawrence Yun, NAR's chief economist, expresses optimism, asserting that interest rates have peaked and are poised for improvement.

Zillow, acknowledging the challenges of predicting mortgage rates, suggests that rates may hold steady based on recent inflation readings. While specific numbers aren't provided, Zillow envisions a scenario where homeowners, enticed by lower rates, may decide to list their properties, potentially alleviating supply constraints.

Redfin foresees a steady decline in mortgage rates throughout 2024, with an average of about 6.6% by the end of the year. They attribute this to both rate cuts by the Fed and an expectation of avoiding a recession, leading to modest declines in rates.

Realtor.com predicts a marginal decline in mortgage rates, with the 30-year fixed expected to average 6.8% in 2024, representing a slight improvement from the previous year.

First American Financial's chief economist, Mark Fleming, foresees mortgage rates hovering between 6.5% and 7.5%. Despite potential rate cuts, he emphasizes the role of the Fed's vigilance against inflation, indicating that the direction of rates hinges on the economy's health.

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