After reaching a twenty year high in 2023, will we see any changes in interest rates in 2024?

The increase in interest rates, reaching up to eight percent, throughout 2023 definitely had an impact on the real estate market.  The rise from three to eight percent over the year put many buyers and sellers home plans on hold.  For buyers, a higher interest rate meant less buying power.  For sellers, longer days on the market coupled with moving out of a lower interest rate loan in their current homes to a higher one in a new home in Locust Grove brought hesitancy to sell.  All of these factors created a housing market with less inventory and activity.  What will happen with interest rates in 2024? 

What could change with interest rates in 2024?

At the end of 2023, mortgage interest rates began to make small drops as the Fed stopped raising the federal funds rate.  As a response to increasing inflation, the federal funds rate had been raised numerous times in 2023.  When that rate increases, other interest rates like mortgage rates, also increase.  As inflation is stabilized, no more increases or a potential drop in the rates will trickle down to mortgage interest rates too.

Will the interest rates in 2024 drop dramatically? 

No.  If you are waiting for rates to suddenly go from eight to two percent, then you will be waiting a lifetime.  The drops in interest rates in 2024 will be incremental.  Many major financial firms have predicted drops in interest rates that will end 2024 in the six percent range.

Even though incremental changes like this may not feel that different, they do make an impact on the buyer’s spending power.  Look at the chart below to see how a buyer would keep over five hundred dollars in their pocket each month with a decrease in mortgage interest rates.

Will interest rates in 2024 drop to two percent again?

Take a moment to think about why interest rates dropped to this historic low.  In an effort to prevent an economic crisis during the global pandemic, the Feds dramatically cut rates to encourage spending and economic activity.   Unless another global pandemic crisis occurs (no thank you), don’t expect to see rates this low again.

Instead of operating in the mind set that you have missed out on the two percent mortgage interest rate and aren’t going to do anything until they return, try to reframe your thinking to center around your long term housing goals.

For buyers, you can:

  • Speak with a mortgage lender to get a financial snapshot of your current buying power
  • Decide if you need to save more money for a down payment
  • Learn about the ways you can improve your credit
  • Learn more about doing a 2-1 buy down
  • Understand that when rates drop, you could find yourself in a sellers market with many other buyers that have waited to purchase a home.  This could mean more competition.
  • Meet with a REALTOR®(hey here is a great one!) and determine the specifics you need in a home so you have another set of eyes looking for your home
  • Spend time visiting different areas so you know where you would like to live.

For sellers, you can:

  • Complete any known repairs and staging suggestions before your home goes on the market
  • Understand that when rates drop, you could find yourself in a sellers market with many other homes on the market.  This could mean more competition.

While I do not have any future predicting abilities, I do think, based on all the financial forecasts out there, that interest rates in 2024 will be lower than 2023.  For buyers and sellers, this is welcome news.  I would encourage all buyers and sellers who anticipate a move in 2024 to get prepared now.  A little preparation in your home or finances can help make the home buying and selling process easier for you.

Need some help understanding more about what you can do? I am always here to help.