Signs of Recovery for the Housing Market
December 20, 2023
It’s a moment many have been waiting and hoping for; the Federal Reserve announced in December of 2023 that rate hikes were not in the cards for the new year.
The big news in this announcement? The idea that the Fed might actually CUT interest rates in the new year after steady increases in federal lending rates charged to banks since 2022.
Fed Talk of Lower Rates in 2024
HousingWire.com reports that the Fed did not promise no rate hikes next year, but raising rates in 2024 ”seems unlikely.”
What do government officials expect in the new year? HousingWire states, “Economic projections from central bank officials showed rates would be slashed to a median of 4.6% by the end of 2024, suggesting three 25 basis points (bps) cuts from current levels.”
Could Rates Continue to Fall all the Way to 2025? 2026?
If the Fed cuts interest in 2024 and doesn’t raise it, rates could sink to roughly 3.6% in 2025, “indicating four more 25 bps cuts. For 2026, Fed officials projected rates to fall below 3% by the end of 2026 through three more quarter percentage point reductions.”
That is all encouraging news, assuming the future unfolds in the way predicted. Some might wonder how all this affects mortgage loan rates. The shortest answer is that when it costs lenders less to loan money, you may realize those savings via a lower interest rate.
HousingWire notes that as the country moves into a “new phase” of the housing market, “experts expect the path for monetary policy to support further declines in mortgage rates, just in time for a traditionally busy spring housing market.”
Challenges in 2024
Lower rates are a great sign, but one issue will determine whether or not the country enters a seller’s market once more.
Inventory.
If there are still low numbers of homes for sale, prices will rise accordingly. A lower interest rate can help borrowers better afford a home, but if they must compete for a smaller number of houses for sale, the advantage of a lower rate may be lost due to higher sale prices.
But much remains to be seen for the buying season of 2024 at press time.
It’s possible that the inventory issue may not be as much of a factor if more people in hot housing markets decide to sell. But it is impossible to predict whether or not that particular trend will be a factor in the coming year. “Wait and see” is a good mantra to use at the time of this writing.
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Your Proof of Ownership Is the Property Title
The big news in this announcement? The idea that the Fed might actually CUT interest rates in the new year after steady increases in federal lending rates charged to banks since 2022.
Fed Talk of Lower Rates in 2024
HousingWire.com reports that the Fed did not promise no rate hikes next year, but raising rates in 2024 ”seems unlikely.”
What do government officials expect in the new year? HousingWire states, “Economic projections from central bank officials showed rates would be slashed to a median of 4.6% by the end of 2024, suggesting three 25 basis points (bps) cuts from current levels.”
Could Rates Continue to Fall all the Way to 2025? 2026?
If the Fed cuts interest in 2024 and doesn’t raise it, rates could sink to roughly 3.6% in 2025, “indicating four more 25 bps cuts. For 2026, Fed officials projected rates to fall below 3% by the end of 2026 through three more quarter percentage point reductions.”
That is all encouraging news, assuming the future unfolds in the way predicted. Some might wonder how all this affects mortgage loan rates. The shortest answer is that when it costs lenders less to loan money, you may realize those savings via a lower interest rate.
HousingWire notes that as the country moves into a “new phase” of the housing market, “experts expect the path for monetary policy to support further declines in mortgage rates, just in time for a traditionally busy spring housing market.”
Challenges in 2024
Lower rates are a great sign, but one issue will determine whether or not the country enters a seller’s market once more.
Inventory.
If there are still low numbers of homes for sale, prices will rise accordingly. A lower interest rate can help borrowers better afford a home, but if they must compete for a smaller number of houses for sale, the advantage of a lower rate may be lost due to higher sale prices.
But much remains to be seen for the buying season of 2024 at press time.
It’s possible that the inventory issue may not be as much of a factor if more people in hot housing markets decide to sell. But it is impossible to predict whether or not that particular trend will be a factor in the coming year. “Wait and see” is a good mantra to use at the time of this writing.
------------------------------
RELATED VIDEOS:
Learn How to Meet FHA Requirements
Understanding APR
Your Proof of Ownership Is the Property Title
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