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Mortgage Rates rose to nearly 8% in 2023. That’s the highest they’ve been in 20 years. “We saw both high home prices and higher mortgage rates in 2023,” says Fara Espandi, Sales Associate at ERA Justin Realty, “That was a double whammy that really affected affordability. But the good news is those days are over. Mortgage rates are finally in the 6% range again.”
“The pandemic was too high, 2023 was too cold,” Odeta Kushi, Deputy Chief Economist at First American Financial Corporation recently told the Washington Post, “2024 won’t be just right, but it will be heading in a normalizing direction.”
So what can homebuyers expect? Economists expect mortgage rates to continue to decline in 2024, but the drop will be modest and gradual. They’re expected to settle between 6 and 7% by the end of the year.
“Don’t expect to see the super low rates we saw during the pandemic,” says Jennifer Darby Metzger, Broker/Owner of ERA Justin Realty, “Those rates were abnormal. What we are seeing now with 6 to 7% is a correction. It’s not less than 3%, but it’s also not more than the 16% your parents and grandparents might have paid in the 70s and 80s. It’s actually in the middle to low end.”
Why is the mortgage interest rate so important when shopping for a home? “It factors into your monthly payment,” says Espandi, “The less you spend paying back your loan with interest, the more you can spend on the house itself.”
At the end of 2023, the average interest rate on a 30-year fixed mortgage was 6.61% according to The Federal Home Loan Mortgage Corporation, also known as Freddie Mac. It peaked in October 2023 at 7.79%. “If inflation starts leveling off and stays that way, the Federal Reserve could start cutting interest rates again in the middle of 2024,” says Metzger, “The Fed doesn’t control mortgage rates directly, but lenders usually follow suit and cut their own rates.”
If you’re looking for a realistic assessment about how much home you can afford to buy this year, Fara Espandi or any of the knowledgeable agents at ERA Justin Realty can help. Give us a call at (201) 939-7500.
