Interest Rates Forecast for 2023-2024

What should you expect with housing interest rates for the rest of 2023 and into 2024? We examine the potential trajectory of interest rates by taking into account the Fed's forecast and the current climate of uncertainty. While the Fed is expected to initiate rate reductions within the next 12 to 24 months, waiting to buy a home in 2024 or 2025 might not be the wisest decision. If you're thinking about buying or selling a home in Huntsville, AL, being mindful of how interest rates impact the housing market can help you make the best decision that suits your needs and circumstances.

Despite a Pause on Rate Hikes, Expect More

Is Jerome Powell fed up yet? After an unprecedented ten consecutive rate hikes, Fed Chairman Jerome Powell announced that they are pausing rate hikes for now. This is good news for 30-year mortgage rates, 15-year mortgage rates, and it's excellent news for the economy in general. We'll wait and see what happens next.

If you look at the survey of the Fed members, about half of these members are predicting that we have an additional .5% rate hike before the end of the year. That translates to two additional .25% rate hikes. It's really possible as CPI data comes down and if inflation comes down over the coming months, that the Fed may be done with interest rate hikes but we'll just have to wait and see.

Future Interest Rate Forecasts

Here's where we're at with future forecasts. We're currently in that 5% to 5.25% range. They're anticipating and expecting 5.6% by the end of 2023 according to what the Fed members are forecasting. We can expect an additional .5% by the end of the year based on today's CPI data. They're predicting 4.6% by 2024 and then a big decrease by 2025 of 3.4%. Potentially an additional 2% drop over the next 24 months is what the Fed is predicting.

What's really interesting about the Fed rates and how that translates into 30-year mortgage rates is there's still a lot of fear and uncertainty baked into these rates. Typically, you look at the 10-year treasury now and then you add a bump to that to get your average 30-year rate. Normally that's somewhere around a 1.25% bump from a ten-year treasury. If you do that, we're actually at about a +2% hike versus that 1.25%, which is what we typically see. So there’s about a +.75% interest rate baked into these 30-year rates due to basically fear and uncertainty. If the Fed truly does pause rate hikes, there's some room for 30-year mortgage rates to come down just because of all that anticipation of uncertainty and unknown baked into our 30-year and 15-year mortgage rates right now.

Should You Wait to Buy a Home?

The good news is we’re anticipating lower rates into 2024 and especially into 2025. If you're thinking about waiting until 2025, I would encourage you to rethink that assumption. The reason for that is how much higher the price will be in 2025. How much is that going to actually lower your mortgage payment with higher prices and then lower interest rates? The thing you want to do is marry the home and date the rate, buy the home you want now then refinance once interest rates are lower.

The other thing is if we have a 2% rate drop, we will likely have a lot of demand coming off of the sidelines and really pushing up prices again. The last time we saw interest rates in the 5.5% range, there was an extreme seller's market with multiple offers significantly driving up prices. If there is a 2% decrease, we will go even lower than that. I think the smart money is buying right now. We're still in a seller's market, but we're getting much better negotiation terms for buyers today than I think we will in 12 to 24 months when interest rates are softer.

If you're looking to take advantage of this market either as a buyer, an investor, or are looking to sell and move up or move down shoot us an email at moving@mattcurtisrealestate.com or call 256-333-MOVE.

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