Mortgage rates are expected to fall below 6% by the fourth quarter of 2024, according to the latest forecast of government-sponsored mortgage company Fannie Mae.
In its latest report, Fannie Mae said it expects the 30-year fixed-mortgage rate to continue falling over the course of 2024, reaching 5.8% by the end of the year. The company also expects mortgage rates to continue falling in 2025, hitting 5.5% by next year's last quarter.
The recent numbers are a sharp revision from its December forecast of 6.5% for late 2024 and 6.1% for late 2025.
"While we think financial markets may have gotten ahead of themselves regarding the extent of Federal Reserve rate cuts this year (we currently forecast 100 basis points of cuts in 2024), the outlook for both short term rates and mortgage rates is now decidedly lower than what we had previously forecast," Fannie Mae said in its report.
"We anticipate that after the past several years of extreme volatility in interest rates, the 30-year fixed rate mortgage rate will continue to moderate over the course of 2024, moving toward a rate below 6% by year end," it continues.
The recent forecast comes after the Federal Reserve signaled plans to pivot away from tight monetary policy, which sent bond yields lower. It also comes after the average 30-year fixed rate fall to 6.60% as of Thursday after peaking at 8% in October. It was the lowest rate recorded in seven months.
Other Forecasts for Real Estate
In addition to a decline in mortgage rates, Fannie Mae predicts homebuilders to continue adding new supply to the real estate market, which could help improve housing affordability. The company also revised its forecast for total home sales in 2024 to 4.96 million from a previous estimate of 4.79 million.
"While we expect affordability will remain stretched and the supply of homes for sale tight, an easing in mortgage rates is expected to begin thawing the existing home sales market, which was held back in 2023 by strong lock-in effects," the company said in the report.
That being said, home prices are still expected to see a modest increase this year, with Fannie Mae projecting a 2.4% increase and business intelligence company CoreLogic predicting a 2.5% year-over-year gain.
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