Will Interest Rates Drop? If Yes, When?
What homeowners need to know about the future of interest rates.
I have a recurring question that keeps coming up, especially in light of the recent decision by the Federal Reserve to keep interest rates unchanged. They opted not to raise rates by a quarter or half point, as they've done in the past.
Naturally, many people are asking me, "What's happening with interest rates?" Well, they have essentially remained unchanged following this decision. As of my latest check, they are averaging around 7.5%.
The next question on everyone's mind is, "When will rates drop?" Predictably, there are numerous forecasts out there, each economist providing their unique perspective. It's no surprise that you can ask ten different economists about interest rate predictions and receive ten different answers.
"By this time next year, rates will likely be lower. "
Check out this link for an article that does a commendable job of explaining the current situation and offers forecasts from three major players in the market: the Mortgage Bankers Association, Fannie Mae, and the National Association of Realtors. They've projected interest rates from the first quarter of 2024 through the fourth quarter of the same year.
The Mortgage Bankers Association has the lowest forecast at around 5.4%, representing a significant drop from today's rates. This could translate to nearly $1,000 in monthly savings on a $500,000 loan.
Next, the National Association of Realtors predicts about 6%, and Fannie Mae estimates 6.3%. So, their projections range from 5.4% to 6.3% for the fourth quarter of next year. It's worth noting that we are entering the fourth quarter of this year, so we have some time ahead.
What will happen when rates drop further? Lower rates will undoubtedly lead to reduced monthly payments for homeowners. However, it's also expected to spark a surge in homebuyers entering the market. This, in turn, may intensify competition for available properties, which are already in short supply. Most sellers are unlikely to give up their favorable interest rates unless they're significantly downsizing.
If you have questions about this topic or anything else, please call or email me. I am always willing to help!