The last two years have seen marked increases in mortgage rates across the country. Prospective homebuyers are increasingly concerned that rising interest rates will prevent them from homeownership, and everyone wants to know when mortgage rates will start to decrease. 

But the answer isn’t that simple. Mortgage rates are influenced by a set of factors that can rarely be predicted or controlled, causing alarm for prospective buyers and mortgage professionals. Though the forecast for next year sounds positive, let’s look at what various experts are predicting for mortgage rates in 2024. 
 

Overview of the Federal Reserve Interest Rate Hikes 

In March 2022, the Federal Reserve raised interest rates 0.25% for the first time since December of 2018. At the time, only six more hikes were expected in response to marked inflation across all industries including petroleum, food, and shelter. Although the goals of rate hikes are to stabilize the price of goods and services and prevent a spike in unemployment, the cost of borrowing does, consequently, increase. As a result, prospective homebuyers have found themselves in a dilemma as they seek out home loans with favorable interest rates and prices they can comfortably afford.  

To date, the Federal Reserve has initiated 11 interest rate hikes in 2023. The national average mortgage interest rate is currently around 7.59% for a 30-year fixed mortgage (September 2023 data). Prognosticators are hopeful, however, that these rates will decrease at some point in 2024.  

What Mortgage Experts Think Will Happen in 2024 

Several experts from the financial sector have weighed in on the interest rate hikes and given their best educated guesses on when the country will see a decrease. The general sentiment is that the rates will come down; the debate, however, is when prospective homebuyers can expect to see some relief – and just how much.  

The End of 2023 

According to the chief investment officer of J.P. Morgan’s Asset Management division, Bob Michele, the Federal Reserve may begin to lower interest rates by the end of 2023. His prediction is based on the Federal Reserve’s backtracking on the initial statement that inflation in 2021 and 2022 was transitory. He posits that as the end of the year approaches, the inflation target will be reached and the Federal Reserve will again back down on raising rates, and even lower them.  

First Quarter Interest Rate Predictions For 2024 

Preston Caldwell, a senior economist for Morningstar, believes that the Fed will begin to pare down interest rates in February. Caldwell believes that by the first meeting of 2024, inflation will fall to the 2% target. This will lead to the 30-year mortgage rate decreasing to around 4.5% by 2025. 

Second Quarter Predictions For 2024 

The chief economist for KPMG, Diane Swonk, has called the journey to lower inflation one that is “littered with potholes.” Swonk says one such pothole came in August and even though the Fed decided to pause the rate hikes, in November they may exercise the option to restart them. If inflation continues to be a problem at the end of 2023, we could see another hike because the Fed likes to see quarters of lower inflation instead of singular months. She forecasts that interest rates will not be cut until May 2024.  

The chief US economist for Goldman Sachs, David Mericle, agrees with Swonk. On a recent episode of the podcast Goldman Sachs Exchanges, he noted that the second quarter of 2024 will see a decrease in interest rates, yet he did not predict a specific time at which this could happen. Citing a lag in inflation that will eventually normalize, he dismissed concerns of a recession, and is hopeful that inflation will hit the 2% sweet spot needed to trigger a decrease in interest rates.  

Latter Half of 2024 Predictions 

Vanguard’s global economics team shared its insights on the matter from a global perspective in a letter dated September 14, 2023. Their perspective is that either inflation must decline further, or a recession must happen before the Fed acts to ease interest rates.  

At a meeting of the American Bankers Association’s Economic Advisory Committee, members  predicted that the Fed is mostly finished with its rate hikes and that next year between May and the end of the year, interest rates should begin to decrease by 100 basis points (1%). 

A Word From The CE Shop’s Mortgage Expert 

Michelle White, the National Mortgage Expert for The CE Shop, offered her thoughts on where mortgage rates could be headed next year. According to White, the data is not strong enough to suggest a political link to interest rates as it was in the past, yet the upcoming election cycle could have an impact. Overall, her forecast suggests that rates will lower between 1% and 1.5% at the most at some point in the year.  

What Leading Organizations Foresee For 2024 Interest Rates 

Fannie Mae, National Association of Realtors®, and Mortgage Bankers Association have all offered their predictions for the mortgage market through all four quarters of next year. While their predictions differ in terms of how much rates will decrease, there is a definite consensus that 2024 will be the year for some relief. The following chart shows each organization’s forecast for the rates on 30-year mortgages.  

	Q1 2024	Q2 2024	Q3 2024	Q4 2024
Fannie Mae	6.8%	6.6%	6.4%	6.3%
National Assoc. of Realtors®	6.1%	6.0%	6.0%	6.0%
Mortgage Bankers Association	6.1%	5.8%	5.5%	5.4%

Important Things to Remember About Interest Rates 

Mortgage interest rates are subject to influences, such as market fluctuations. These changes are often due to factors that are beyond human control such as pandemics, war, governmental operations, and other current events that are generally unpredictable. As such, even for economists and other financial experts, it is difficult to determine what interest rates will do from one year to the next.  

If you’re a prospective homebuyer who is concerned about the right time to buy a home, it’s important to consider the current financial standing, the location of the property, future plans for the property (how long you plan to live there), and future refinancing options.   If you’re already in the mortgage industry, staying up-to-date on current mortgage trends and maintain your continuing education to understand how to best serve your clients as the economy changes. While rates are currently high, waiting to buy may put buyers at risk for rates to be even higher months from now.

Courtesy of OMREALTYGROUP.THECESHOP.COM  

Shawn Johnson, a 42-year-old man that lives in Dallas, TX has been sentenced to a decade in prison for a scheme in which he tricked victims into investing with him in ventures that did not exist.  

How Johnson Received Investment from Victims 

Johnson would lie to victims about his professional background, his contacts with celebrities, and his personal net worth, in order to induce them to invest in the scheme. 

He would claim to be involved in financing for major events, including a party in Washington for the second inauguration of President Barack Obama, a world tour by the singer Rihanna, and even the 2015 fight between boxing champs Floyd Mayweather and Manny Pacquiao.  

Johnson was the ultimate conman that understood his victims and how to “sell” them on credible events. He would go to great lengths to make investors believe in his wealth and success. According to court filings, Johnson would arrive at business meetings in expensive custom suits, stepping out of a Rolls Royce driven by a personal chauffeur.  

While this seems far-fetched and clearly not legitimate, Johnson would have his “assistant” send investors promissory notes that guaranteed their return on investments. This small token of promise was enough to swindle investors for a total of $1 million. Even if a victim could only invest a few thousand dollars, Johnson would take it.  

However, according to federal authorities, there was never an assistant and the promise of high returns (up to 40%) was a complete lie.  

Like most con artists we’ve covered in previous blogs, this investor money went directly into Johnson’s pockets and fueled his lavish lifestyle. He purchased luxury vehicles, designer clothes, parties at nightclubs, tickets for sporting events, and gambling at casinos.  

“For over ten years, the defendant made his living swindling people out of money – lots of people and lots of money,” prosecutors wrote in court papers arguing for the stiffest sentence possible. “He was a professional con-man who used his good-natured and seemingly relaxed personality to endear himself to unsuspecting people and gained their confidence through a mix of friendly banter and schoolyard braggadocio.” 

As most of these cases go, the victims are always the ones that are hurt the most. Prosecutors say that many of the investors have lost thousands of dollars, life savings, had their credit ruined, or were forced into foreclosure or bankruptcy as a result of his schemes. 

How to Avoid Real Estate Scams 

Reading about scammers who prey on unaware victims can be disheartening and discouraging, but take it as a lesson to be wary as you conduct business in the real estate world.  

Do your research on common real estate scams, and be cautious as you work to protect yourself and your clients. As the saying goes, if it seems too good to be true, chances are it is.  

Article courtesy of our Affliate partner – TheCESHop.com

Check out the quick tip on House hacking from my partner/affiliate.

Let’s Learn About the Professionals Involved in the Homebuying Process 

For many first-time homebuyers, navigating the real estate industry and the homebuying process can feel overwhelming. That’s totally understandable — after all, a home is often the largest purchase that a buyer will make in their lifetime. But the journey to homeownership can also be incredibly exciting, and the more you learn about the process, the better prepared you’ll be. 

Today, we’re going to be talking about the various professionals that you’ll encounter on your homebuying journey. 

uyer’s Agent 

Your real estate agent is the person that you’ll be spending the most time with as you search for and ultimately purchase a home. Your agent’s job is to advise you and advocate for you through the entire homebuying process, from touring homes to closing on your dream home. Your agent has extensive knowledge of the real estate industry and will be your most valuable resource. 

The terms “real estate agent” and “REALTOR®” are often used interchangeably, but they actually mean different things. A real estate agent is an individual licensed to assist people in selling, purchasing, or renting property, while a REALTOR® is any licensed real estate professional who is a member of the National Association of REALTORS®. 

Seller’s Agent 

When you make an offer on a home, the seller will also be represented by a real estate agent, also known as the listing agent. You might not be directly interacting with this agent very often, but they will be working behind the scenes to advise the seller up until the day you close on the home. 

Mortgage Loan Officer 

Unless you’re able to pay for your home entirely in cash, you’re going to be working with a Mortgage Loan Officer or a Mortgage Loan Originator to finance your new home.  

An MLO is a financial professional who helps applicants acquire loans when purchasing property. They guide clients through the mortgage approval process from the beginning of their loan application to closing on the property itself. 

Home Inspector 

When you’re buying a home, it’s often a good idea to make your offer contingent on the results of an inspection. 

An inspection is intended to assess the condition of the home and uncover potential damage or safety issues. A qualified home inspector will examine the property top to bottom, from its plumbing and electrical work to its roof and foundation. They might recommend repairs or notify you if something isn’t up to current code. 

Home Appraiser 

A home appraisal, which determines the fair market value for the home, is often going to be required by your mortgage lender. The appraiser, typically required by state law to be an independent third party, will consider the general condition of the home, any upgrades made to the home, and comparable properties in the area to determine if the price you’ve agreed to pay for the home is fair. 

And Many More 

Of course, this list doesn’t cover all the professionals you’ll encounter on your journey to buy a home. There are plenty of other people that you’re likely to meet along the way, including employees at the title company and insurance company that you end up working with.  

But we hope that this helps you understand the homebuying process a bit better! 

Courtesy of OMREALTYGROUP.THECESHOP.COM