Economists are foreseeing a modest easing of mortgage rates next year, though the predictions suggest that the average rate for a 30-year home loan will still be above 6%. Despite the potential for lower rates to attract more buyers, homeowners who secured favorable rates two years ago are unlikely to be swayed to sell.
This scenario sets the stage for the housing market to continue grappling with a limited supply of homes, even if rates decrease.
According to Danielle Hale, chief economist at Realtor.com, the costs will remain high, leading many individuals to opt for a wait-and-see approach. Hale’s forecast anticipates the 30-year mortgage rate averaging 6.8% in 2024, gradually decreasing to 6.5% by year-end.
Meanwhile, Mark Fleming, chief economist at First American Financial, predicts the average rate to range between 6.5% and 7.5%.
The National Association of Realtors projects the 30-year home loan rate to average between 6% and 7% at the beginning of next year’s spring homebuying season. Other housing economists also expect the average rate to hover around 6% in 2024, which is still double the rate from just two years ago.
While any decline in mortgage rates is welcomed by buyers, the challenge remains in the shortage of homes on the market. This scarcity has propped up home prices, even as sales of previously owned U.S. homes declined by 20.2% in the first 10 months of the year. Despite a potential modest drop in rates, homeowners are unlikely to be motivated to sell, especially if they are hesitant to take on a mortgage with a higher rate. Fleming notes that this reluctance to sell is likely to persist as long as mortgage rates remain elevated.
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