The recent surge in mortgage rates was fueled by the hotter-than-expected inflation rates and strong labor data, but some experts believe the rates would likely drop before the year ends.
In November 2023, Realtor.com published a 2024 Housing Market report where they forecasted that mortgage rates are likely to hover around the 6.8% range and drop to 6.5% by the end of the year. Other experts, including KPMG senior economist Yelena Maleyev, echoed the prediction.
While it is unclear when the rates will drop, many experts believe the numbers will start declining once the Federal Reserve cuts interest rates. The Fed has yet to disclose when they plan to do the cuts but suggested they would likely cut rates three times in 2024.
Should the cuts come and the mortgage rates fall, here's what buyers can expect, according to Realtor.com.
Declines Unlikely To Be Sudden
When the Fed begins cutting interest rates, mortgage rates are likely to fall. However, the decline would happen gradually and may still see ups and downs.
"We expect mortgage rates will continue to gradually decline over the course of the next few years alongside easier monetary policy," Charlie Dougherty, director and senior economist at Wells Fargo, told the real estate firm. "We look for the average 30-year mortgage rate to fall to 6% by the end of 2024 and 5.75% by the end of 2025."
Home Prices May Come Down
Home prices may come down by 1.7% throughout 2024. In addition, declining mortgage rates would also improve home affordability as it gives buyers more spending power. That being said, the declining prices would also likely bring more buyers into the market, which can potentially drive prices even higher again and spark bidding wars.
Due to the stiff competition in the housing market, buyers may be forced to put in more offers to secure the home of their dreams.
More Housing Supply May Come
When mortgage rates fall, it may encourage more homeowners to sell their property and slightly expand the housing inventory. Currently, about 80% of mortgage holders are carrying a rate below 5%, Dougherty noted.
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