All the changes Americans should expect in mortgage rates for the rest of 2024

The housing crisis continues to make home ownership a pipe dream for thousands of Americans vying to purchase property as mortgage rates rise. At the beginning of the year it seemed like the conditions may have been looking up, or at least would be soon, because of a predicted drop in interest rates, but it seems like the reality has not matched up with the predictions.

Now, almost at 6 month mark of 2024 the anticipated interest rate cuts have yet to happen, and the market is nowhere close to cooling down, there is still an important disparity between supply and demand, and affordability of housing is as bad as ever.

Jessica Lautz, deputy chief economist at the National Association of Realtors (NAR), gave her take on the issue “We all expected that at this point in the year, we would see stronger home sales activity, and interest rates [would be] down. [Rates] moved back up into the 7% range, and that does put a damper on home sales activity, and it changes who can purchase a home.”

Given the situation, experts have now revised their predictions regarding rates and prices for the rest of 2024 to a much bleaker and seemingly realistic outlook.

Higher mortgage rates for longer

While the Federal Reserve had very detailed and clear plans to reduce inflation at the beginning of the year, the current economic climate has made it so that the necessity to maintain its strict monetary policy negatively affects the lowering of interest rates until prices come down.

The effect on the housing market is twofold, as mortgage rates will stay higher for longer and even when the Fed manages to finally cuts the benchmark interest rate they will likely stay relatively high.

Orphe Divounguy, Zillow’s senior economist also gave his take “I don’t see mortgage rates declining significantly this year. Mortgage rates are famously difficult to predict, but I’d be surprised if we ended the year with rates below 6%.”

But Divounguy and Lautz are not the only ones revising the tendencies. The Federal National Mortgage Association, commonly known as Fannie Mae, increased its year-end prediction to 6.4% from 5.9% earlier in the year; The National Association of Realtors (NAR) modified its forecast to 6.5% from 6.3%; and Wells Fargo’s May economic summary adjusted its monthly rate outlook to 6.50% from January’s 6.05%.

Lautz blames persistent housing inflation for the increased predictions, as this metric is around a third of the Consumer Price Index (CPI), and with reason. “There’s more people in the rental market because they can’t afford to save for a down payment, and they can’t afford to save for a down payment because rent is high,” Lautz posited, explaining that this “resembles a “feedback” loop” where inflationary pressure keeps rates high, elevating home costs, which in turn squeezes renters.

Growing home prices

The new predictions have home prices increasing for the rest of the year, with Fannie Mae forecasting a nearly 5% price appreciation and NAR predicting the year-end median price on existing homes will coming up to $393,000 from $387,000 in 2023.

“One thing that seems to be pretty solid is that home prices are going to continue to go up, and the reason is that we don’t have housing inventory,” stated Lautz.

Doug Duncan, Fannie Mae’s chief economist, agrees with her. Stating that even with high mortgage rates, the inventory shortage is what is “causing the problem in price.”

Be as it may, housing reports show that current homebuyers are suffering a price crunch with nearly 30% of homes being sold above the listing price in March and many of them engaging in bidding wars which drive sup the process even more.

Lautz concludes looking at the phenomenon “We’re continuing to see…that home prices are continuing to go up. There are still bidding wars and three offers for every home listed last month.”