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Continue readingNavigating Mortgage Rate Trends: Insights and Forecasts for the Real Estate Market
Predictions and Projections for Mortgage Rates in the Coming Years
The landscape of the real estate market is intricately linked with the trajectory of mortgage rates. As we navigate the ever-changing economic environment, various institutions and experts have offered their projections for the path that mortgage rates might take in the near future. These forecasts provide valuable insights for potential homebuyers, sellers, and investors alike, enabling them to make informed decisions based on the anticipated changes in borrowing costs.
The Outcome
While each institution’s projections may differ slightly, a common thread emerges the anticipation of declining mortgage rates in the coming years. These forecasts provide valuable information for potential homebuyers and those involved in the real estate market, aiding them in making well-informed decisions based on the expected changes in borrowing costs. As economic conditions evolve, the accuracy of these predictions will become clearer, ultimately shaping the future landscape of the housing market.
How these factors contribute to the broader picture:
The decrease in interest rates is likely to be a welcomed development for both sellers and buyers. However, it’s important to note that these predictions don’t imply a complete return to historically low rates—those days seem to be behind us for the foreseeable future.
As interest rates decline and the affordability index increases, prospective buyers will find themselves with increased purchasing power. This surge in affordability will also contribute to a rise in the buyer sentiment index regarding home purchases. Currently, this index reflects that 82% of buyers consider it unfavorable to buy a home due to the combination of elevated interest rates and housing prices.
As the scenario changes and interest rates start to decrease, we anticipate a significant portion of the 82% of cautious buyers on the sidelines will reengage in the housing market. This renewed interest, combined with improved affordability and increased enthusiasm for homebuying, is likely to lead to a scenario where home values start to appreciate at a faster rate compared to the present.
Decision Time
As Warren Buffet famously stated, “Be fearful when others are greedy, and greedy when others are fearful.”
The most prudent trajectory within the realm of our discerned understanding would be for prospective buyers to proactively pursue their aspirations of homeownership prior to the broader populace. Should the cacophony of experts’ prognostications hold true and the prevailing interest rates experience a decline, the avenue of refinancing at the diminished rate emerges as a viable choice, thereby securing a residential abode in advance of the burgeoning fervor among competitors. Conversely, in the event of errant forecasts, substantial savings would also be accrued by evading elevated interest rates.
DATA:
MBA’s Anticipations
The Mortgage Bankers Association (MBA) has provided its outlook on mortgage rates, forecasting that the 30-year fixed mortgage rate will experience an average of 5.9% during the fourth quarter of 2023. Beyond this year, the MBA anticipates a gradual slide in mortgage rates, reaching an average of 4.9% by April 2024. This projection suggests a potential easing of borrowing costs, which could stimulate activity in the housing market.
Morningstar’s Insights
Economists at Morningstar, a renowned financial services firm, offer their own perspective on the path of mortgage rates. Their projections suggest that the average 30-year fixed mortgage rate will stand at 6.25% in 2023. Looking ahead, Morningstar envisions a decline to 5.0% in 2024, followed by a further decrease to 4.0% in 2025. These projections point towards a more gradual and sustained decline in borrowing rates over the next few years.
Goldman Sachs’ Analysis
The investment banking giant, Goldman Sachs, lends its voice to the discussion by estimating that the 30-year fixed mortgage rate will conclude 2023 at 6.4%. For the subsequent year, Goldman Sachs predicts an average mortgage rate of 5.9% in 2024. This projection suggests that while the rates may experience a slight decrease, they will remain above the historical lows seen in previous years.
NAR’s Outlook
The National Association of Realtors (NAR) brings its perspective to the table, forecasting a decline in mortgage rates as well. NAR’s economists project a dip to 6.4% by the end of 2023, followed by a further reduction to 6.0% in 2024. These predictions align with the overall trend of declining mortgage rates, potentially influencing buying decisions and overall market dynamics.
Morgan Stanley’s Perspective
Morgan Stanley, a prominent financial institution, projects that the 30-year fixed mortgage rate will initiate 2024 at 6.0%. This projection indicates a stabilization of rates at a level similar to those forecasted by other entities, further solidifying the notion of a gradual decline in borrowing costs.
Moody’s Analytics’ Insights
The financial intelligence arm of Moody’s, Moody’s Analytics, projects that the 30-year fixed mortgage rate will remain relatively high through much of 2023, with an average of 6.5%. While this forecast deviates from some others, it suggests a potential delay in the downward trajectory of rates before aligning with the broader trend.
Realtor.com’s Perspective
Economists at Realtor.com, a prominent home listing site, hold the belief that the 30-year fixed mortgage rate will commence 2024 at 6.1%. Their projection hints at a continued decline in mortgage rates, although at a pace that may vary from other estimations.
Fannie Mae’s Expectations
Economists at Fannie Mae, a government-sponsored enterprise, provide their own outlook on mortgage rates. Fannie Mae anticipates an average of 6.6% for the 30-year fixed mortgage rate during the fourth quarter of 2023. Looking forward, Fannie Mae foresees a gradual reduction in rates to an average of 5.9% in the fourth quarter of 2024. Additionally, for the entire calendar year of 2024, Fannie Mae’s forecast suggests an average mortgage rate of 6.1%.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook and on Twitter.
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
Drew Morgan—Broker Associate 01124318 | Christine Morgan—Sales Associate 01174047
Co-Owners of Morganhomes, Inc. Licensed under RE/MAX Star Properties 01811140
“Unveiling Housing Trends: Navigating New Listings Decline and Market Fluctuations”
We recently published an article titled “Navigating Bay Area Real Estate: Balancing Wealth Optimization and Limited Data Amidst Shifting Market Dynamics” that sparked significant reader inquiries seeking clarity. Within this piece, we delved into the year-over-year assessment of home values for June, a customary method to analyze housing trends.
However, exploring micro trends can prove beneficial during market volatility. This involves observing month-to-month changes. The challenge in doing so is the presence of seasonal fluctuations in the real estate market. The trends we compiled for San Mateo County and our residing city, Belmont, illustrate a gradual price recovery compared to the preceding article, where annual values had receded in quarters Q2-Q4 of 2022.
Though yet to reach the peak levels of 2022, at least for now, home values appear to have stabilized and are maintaining, if not gently appreciating.
We exemplify this by presenting an illustrative graph generated by Fred®, utilizing the Case-Shiller® data methodology linked here. While this data trails the market by three months, it remains valuable for investors analyzing value patterns. The most recent trend depicted suggests we may have surpassed the market trough and are trending upwards.
Opting for gradual growth is preferable due to its sustainability. The graph we provided indicates growth is so gradual that any economic shift could easily reverse the trajectory.
The market correction following the hyper-growth observed in Q1 of 2002—driven by imminent interest rate hikes—seems to have subsided. The question now is the duration it will take for buyers and sellers to adjust and realize that the era of sub-3% loans is unlikely to return, prompting them to proceed with their life plans.
Sales in the Bay Area have declined by 30%, a result of a similar 30% drop in available new listings.
Presently, prevailing market dynamics impact our housing sector, with both sellers and buyers hesitating due to current interest rates, despite their historical below-average nature.
A further incongruous position we have today is the dichotomy between sellers awaiting price rebounds and buyers finding that prices are already too steep.
According to a recent survey by Fannie Mae, the nation’s primary purchaser of secondary market loans, 82% of buyers believe it’s an inopportune time to purchase a home.
The query remains: When will one of these groups move into action?
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA. with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook and on Twitter.
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
Drew Morgan—Broker Associate 01124318 | Christine Morgan—Salesperson 01174047
Co-Owners of Morganhomes, Inc. Licensed under RE/MAX Star Properties 01811140
Navigating Bay Area Real Estate: Balancing Wealth Optimization and Limited Data Amidst Shifting Market Dynamics
Given the substantial wealth associated with owning property in the Bay Area, it’s rational for sellers to strive for enhanced investment gains and carefully assess the most opportune moment to sell their residences. However, the challenge lies in the limited data available to assist them in reaching a well-founded decision.
Our objective is to adopt a forward-looking futurist strategy to aid individuals in making well-informed decisions while avoiding any reliance on methods like fortune-telling cards or crystal balls, or theories that stand to benefit us personally.
The stability of our real estate values has been influenced by Sellers’ reduced desire to sell their homes, a direct consequence of rising interest rates. This has maintained a state of relative equilibrium in the market compared to recent times.
However, the situation might shift in 2024. More Sellers have postponed selling their properties this year, hoping for a more favorable market next year. This presents a potential issue.
Historical market downturns, like the one in 2007, have seen buyers holding off on purchases for years. When they eventually rejoin the market, they tend to do so simultaneously due to changing conditions that they have in common, resulting in multiple offers and price escalation—a phenomenon observed in 2012 following a housing hiatus.
Sellers could also face this challenge. Previously, when government bond purchases kept interest rates artificially low, and people refinanced at around 3%, the anticipation was that rates would rise when the bond purchases ceased. As predicted, Sellers have now refrained from refinancing and moving due to the prospect of significantly increased mortgage payments.
Given that interest rates have doubled in the past two years, Sellers lack motivation to upsize their homes, considering their mortgage payments would more than double. Property tax hikes further compound this issue. Many Sellers we’ve communicated with plan to wait until 2024 before acting.
In this scenario, if more homes come onto the market while the buyer pool remains static, it could lead to lower home prices in 2024 due to reduced competition for available homes.
Another challenge in 2024 is the presidential election year, which is historically associated with market pullbacks due to political and economic uncertainties. These uncertainties breed caution and indecision among buyers, particularly from May to November, resulting in further downward pressure on prices.
This graph illustrates the effect the highly contentious election between Hillary Clinton and Donald Trump in 2016 had on home values during those months.
Drawing from historical market trends, we recommend Sellers take proactive measures to address the potential influx of 2023’s home Sellers. Selling before May 2024 becomes crucial for maximizing returns ahead of the election year’s uncertain market conditions.
Drew & Christine Morgan are REALTORS/NOTARY PUBLIC in Belmont, CA with more than 30 years of experience in helping sellers and buyers in their community. As Diamond recipients, Drew and Christine ranked in the top 50 RE/MAX agents nationwide and the top 3 in Northern California. They may be reached at (650) 508.1441 or emailed at info@morganhomes.com.
For all you need to know about Belmont, subscribe to this blog right here. You can also follow us on Facebook and on Twitter.
The information contained in this article is educational and intended for informational purposes only. It does not constitute real estate, tax, insurance or legal advice, nor does it substitute for advice specific to your situation. Always consult an appropriate professional familiar with your scenario.
Drew Morgan, Broker Associate 01124318 | Christine Morgan, Sales Associate—Owners of MorganHomes, Inc. Licensed under RE/MAX Star Properties, 01811140