Purchase when home prices are low, and refinance when rates drop.  That is the word on the street.  Financial Institutions and analysts predict refinancing opportunities in 2024 and beyond.  David Haynes, Division President of Optio Financing, expects that current borrowers will be able to refinance within the next 24 months at significantly lower rates.  His sentiment is shared with major financial institutions and analysts, including Wells Fargo, Bank of America, Forbes, Freddie Mac, and Morningstar.

This is encouraging for buyers in today’s housing market.  Current buyers benefit from lowered home prices in most US markets, and if the general market predictions are correct, these buyers can save even more by refinancing as mortgage rates decline.

According to Forbes Advisor, mortgage rates ended July 2023 precisely where they started, a perfect metaphor for an enduring sluggish housing market.

The average 30-year, fixed-rate mortgage crept up the last week of July as the Federal Reserve delivered on its intentions to resume interest rate hikes at its most recent meeting, raising its policy rate to the 5.25% to 5.5% range.

July’s mortgage rates began their seesaw movements at 6.81%, rose 15 basis points the following week to a 2023 high of 6.96%, before ending the month back at 6.81%, according to Freddie Mac.

Mortgage rates continue to fluctuate slightly. For the week ending August 10, the average 30-year fixed-rate mortgage rose two basis points from the week prior to 6.96%, according to Freddie Mac. (A basis point is one-hundredth of one percentage point.)

Though housing market watchers expect mortgage rates to remain elevated amid ongoing economic uncertainty and the Federal Reserve’s rate-hiking war on inflation, they believe rates peaked last fall and will decline…

CNET reports that in the near term, mortgage rates are likely to stay roughly where they are: between 6.5% and 7%. If mortgage rates are indeed near their peak currently, they’re likely to start declining by early 2024 or before.

Morningstar predicts that the fed-funds rate will fall below 2.00% by mid-2025 and that the 30-year mortgage rate will fall to 4.5% in 2025 from an average of 6.5% in 2023.

First, we expect the Fed to pause its rate hikes after having conducted its final hike in July 2023. Then, starting around the beginning of 2024 (we expect in the first meeting in February 2024), we expect the Fed to begin cutting the fed-funds rate.

The Fed will pivot to monetary easing as inflation falls back to its 2% target and the need to shore up economic growth becomes a top concern.  When this happens, the consensus is that as interest rates come down in 2024 and 2025, upward pressure on home prices will resume.

“When rates come down, we’re going to be in store for another hot housing market where there are more buyers than sellers jacking up prices because we haven’t solved the problem” of low inventory, says Daryl Fairweather, chief economist at Redfin. “It’s still that affordability problem. That’s going to stay with us.”

This sentiment is further fueling the current market of home buyers.  If you can afford to buy now, you may end up a real winner in the long run.

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