Mortgage Rates Forecast 2024. my 5 Best reasons for buying before rates Drop!

My mortgage rates forecast 2024 may not be what you’d expect, so buckle in. This is information coming directly from someone with boots on the ground experience along with some valuable insights and undeniable data.

But how did we get here? In October of 2021, the mortgage markets tanked. I mean, it really hit the fan. Mortgage rates went from below 3% to over 8% in 2 short years.

Fast forward to early 2023, the federal reserve gave us a pump fake in January, teasing us with the potential of lower rates and the mortgage markets responded favorably. But then everything changed. By October of 2023, consumers with excellent credit were locking in rates over 8%. Brutal.

Then things changed, FAST and changing FASTER.

1. Something GOOD is already Happening

November 2023 was the biggest turn-around I’ve seen for mortgage rates in a long time. I mean, we have some serious momentum heading into 2024 which makes the mortgage rates forecast very interesting.

We are already seeing more competition on homes in hot areas. The nice homes are starting to be bid up again, and this with rates still in the 6s. But what is more interesting is what will happen when rates go down. Don’t kid yourself, many homebuyers are keeping their ears to the ground and are hearing and reading the news about mortgage rates falling.

And I think most every Realtor and Loan Officer out there have been singing the whole ‘Marry the House, date the rate!’ — which is kinda cute actually and so apropos today.

Most people think they get a 30-year loan and just ride it into the sunset until they pay off the house. NOT. Did you know the average shelf-life of a mortgage is 4.8 years? And p.s. there is very little data online about this, so I’m giving you my averages based on almost 30 years in the mortgage business.

Granted that interest rates are higher now. The higher the rate, the shorter the shelf-life, and vice-versa. But you get my drift… the madness in housing has already started and many Sellers are waiting to jump into fray. What do they want? Of course, lower rates!

Nobody has a crystal ball.

No matter where people think rates will get to (I have my thoughts so keep reading), it really doesn’t tell the whole story. What I want to really dive into is what does the mortgage rates forecast mean for homebuyers and home sellers. What will happen when mortgage interest rates take the expected dive in 2024?

2. The Market Dynamics are Unreal!

We’ve seen housing experience significant fluctuations. Mortgage rates, demand, and supply… these all play a pivotal role in shaping the landscape. As we dive into 2024, there’s a lot of speculation about what will happen when mortgage interest rates drop.

Based on various indicators and the current economic environment, it’s plausible to project that a considerable decrease in rates could ignite a frenzied rush in housing demand, reminiscent of what was witnessed in February 2023 and, on a larger scale, in 2021.

I know many of you remember just how difficult that 2021 market was. Low rates qualified pretty much any homebuyer with good job and a pulse, and buyers were flowing from one bidding war to the other.

The Dynamic of Housing

At its core, housing is governed by the principles of supply and demand. When there are more houses available than people wanting to buy them, prices generally drop. Conversely, when demand exceeds supply (like in 2020 & 2021), prices tend to rise.

In the current scenario, a rather bizarre situation has arisen.

Higher mortgage rates tend to tank home prices. It didn’t happen. Everyone was calling for the housing crash of the century. It didn’t happen.

Strangely enough, higher interest rates along with the limited housing inventory, kept home prices on a slowly moving ‘up’ escalator. Prices continued to rise.

Zillow Is Smart

A year ago, Zillow Group came out with some interesting statistics. They called for continued appreciation in the face of higher rates. Here is a video I did about the news from Zillow.

Although home purchases were down and interest rates were expected to continue rising, they still saw appreciation. They were right. And I’ve been saying all along that we are not in a housing bubble, the market is not crashing and there will be appreciation in 2023 and beyond.

3. A Feeding Frenzy of housing is coming

Imagine a situation where a popular product is in limited supply, and its price is temporarily high. Many consumers will hold off on purchasing, waiting for a potential price drop.

Now, if the price does decrease, all those waiting consumers will pounce on the opportunity, causing a sudden surge in demand.

This is the exact scenario I’m expecting with housing when rates drop.

Mortgage Rates Forecast 2024 will shock housing

If the rates in 2024 dip by even 0.5%, it is estimated that this would reintroduce millions of potential homebuyers into the market. A simple drop below 6%, as seen in February 2023, created a feeding frenzy, resulting in multiple market offers.

Extrapolate that to a bigger and more prolonged rate drop, and we might just be staring at an unprecedented housing demand. Personally, I concur with many analysts who predict a more than expected federal funds rate drop which in turn will cause mortgage rates to DIVE.

My personal mortgage rate forecast is a much larger decrease to mortgage rates than expected. But there is MUCH more to this story.

The Buyer Apocalypse

All the pent-up demand will come to the forefront, resulting in what can aptly be termed a “buyer apocalypse”. Potential homeowners who have been biding their time will rush to capitalize on these favorable rates.

The sudden surge in buyers, coupled with limited housing inventory, might very well lead to a scenario worse than 2021. Yeah, I said it. Worse than 2021.

I envision multiple offers on homes, skyrocketing prices due to demand, and the emergence of a seller’s market unlike any we’ve seen before—a seller’s market to eclipse all previous seller’s markets.

Sellers will then wake up about 6 months later and figure it’s a good time to sell. THEN, we will start seeing some inventory.

I’m calculating Spring of 2025 before the buyers start regaining any sort of control.

4. buying now is easy, but that will change.

For those contemplating entering the housing market, my advice is crystal clear: BUY NOW.

Don’t wait.

While there might be temptations to wait for rates to drop further, the potential increase in housing prices due to overwhelming demand will offset any savings from reduced mortgage rates. The real story from the streets and my personal experience in this market, is that sellers are dealing. They are negotiating, they are reasonable, and some are even desperate. It’s much easier to strike a deal now, but it won’t last.

For those who believe that the housing market is on the verge of a crash, it’s essential to understand the underlying economics. A housing crash violates pretty much every economic principal. Home prices won’t crash when there is a high demand for housing! How can a crash happen when home prices continue to go up across the country in the face of high rates? Lower rates simply bring in more buyers, i.e. more demand. Same inventory, more demand = higher prices.

Beware the click-bait.

A slew of clickbait articles might suggest an impending doom for the housing market, but the numbers and economic indicators tell a different story. Stick to the fundamentals. The housing economy is strong, and the anticipated surge in demand when mortgage rates drop in 2024 only reinforces my implore of being a homebuyer sooner than later.

5. The Major Implications of Rates Dropping will be highly evident by summer 2024.

As we brace ourselves for the changes 2024 might bring, it’s crucial to be informed and strategic. What happens when mortgage rates drop in 2024 is likely to be a historic rush towards housing, shaped by pent-up demand and limited supply.

The resulting sellers’ market will be intense, making it crucial for potential buyers to act sooner rather than later. Remember, in the world of real estate, timing is everything.

But what are the potential implications of the predicted mortgage rates drop in 2024?

What’s Going To Happen When Mortgage Rates Drop?

As we edge closer to 2024, the question on many people’s minds, especially those considering entering or capitalizing on the housing market, is: what happens when mortgage rates drop in 2024? The intertwined dynamics of supply and demand, coupled with external economic factors, create a complex, ever-shifting landscape.

The Historical Context

Before projecting the events of 2024, it’s essential to understand the historical context. The housing market frenzy of 2021, with its soaring prices and high demand, set a benchmark for market volatility. Then came 2023, when a brief dip below 6% mortgage rates led to a flurry of activity reminiscent of 2021. We’ve been over this. But the TREND points to an incredibly sensitive market, quick to react to even the smallest rate shifts.

This is what should worry the homebuyers that wait.

The Fundamentals of Supply and Demand

I played Golf in college. Thankfully I was good enough to gain a scholarship to play golf at a D1 university, George Mason University. Go Patriots! Thankfully my low GPA and ‘connect-the-dots’ technique with the SAT didn’t matter. All I needed was a 2.0gpa and an 800 on the SAT!

I always tell my kids that I’m a bad example for how to get into college.

When people asked me what I studied, I said ‘Golf, along with French and Hispanic girls’. It’s no surprise that I’m married to a lovely Hispanic and speak both Spanish and French. I digress.

I guess the point of all this is that my very first class in college was Econ 101.

Economics 101 teaches us about the dance between supply and demand. In a balanced market, they move in tandem. But when there’s a disconnect, as we’ve seen with the current limited housing inventory yet stable prices due to reduced demand, things get interesting.

And what happens when mortgage rates drop? This balance will likely be disrupted further.

Taking our earlier analogy a step further, consider a concert with limited tickets. If ticket prices soar, many fans might wait, hoping for a last-minute price drop. If prices do fall slightly, not only will the waiting fans pounce, but even those who hadn’t considered attending might now jump at the chance.

The result? A sold-out concert, with many still clamoring for tickets.

Statistics show staggering Implications

A 0.5% dip in mortgage interest rates is not merely a statistical figure; it represents aspirations, dreams, and the tangible ability of millions to own a home. When rates drop, it’s not just the numbers that change – it’s the entire landscape of potential homeownership.

1. Heightened Competition.

What happens when mortgage rates drop in 2024 is likely to be a surge in homebuyer competition. With more buyers in the market, bidding wars will become common, driving prices up further.

2. Increased Home Valuations.

Due to the spike in demand, home valuations will rise. This is good news for sellers but poses challenges for buyers, especially first-time homeowners.

3. Rental Market Effects.

With a heightened focus on buying, rental demand might decrease, leading to potential stabilization or even a reduction in rental prices.

4. Economic Ripple Effects.

The housing market doesn’t exist in a vacuum. A rush in housing can stimulate related sectors like construction, home improvement, and finance.

When to Buy a Home then?

Given the anticipated upheaval, potential homeowners need a strategy. While the allure of waiting for even lower rates is strong, the potential cost in terms of higher home prices might negate any savings. For those on the fence, the time to act is now.

Furthermore, while some clickbait headlines might suggest an impending housing crash, it’s vital to base decisions on sound economic principles rather than sensationalism.

The data indicates a resilient housing market, poised for growth, especially when considering what will happen when mortgage rates drop in 2024.

Rick’s Conclusion

The housing market of 2024 promises to be dynamic, challenging, and potentially rewarding. As the world watches and waits, anticipating the effects of mortgage rates dropping, one thing is clear: preparation, knowledge, and timely action will be the keys to navigating this market.

Those pondering what happens when mortgage rates drop in 2024 would do well to remember that in the realm of real estate, foresight and strategy reign supreme.

For more information about the mortgage markets and the future of housing, check out this helpful blog article from Guaranteed Rate.