The real estate market has been abuzz with the news of falling interest rates. According to Forbes, the average current mortgage rate on a 30 year fixed is 7.26% and 6.35% on a 15 year. These declines have significant implications for both homebuyers and sellers, as well as for the overall dynamics of the real estate industry.
Declining interest rates have historically been associated with increased affordability and heightened demand in the real estate market. With lower interest rates, homebuyers can secure mortgages at lower costs, making homeownership more accessible. On the flipside, this can potentially lead to an uptick in home sales and an increase in property values as demand outpaces supply. For sellers, the reduced cost of borrowing can attract more potential buyers, leading to a competitive market and potentially higher selling prices. Additionally, homeowners looking to refinance their existing mortgages may find it advantageous to do so in a lower interest rate environment, freeing up additional funds for other investments or expenses.
Looking ahead to early 2024, while predictions in the financial world are always subject to change, there are several potential outcomes to consider:
1. Continued Demand: If interest rates remain low or continue to decrease, the demand for housing will increase. This could lead to a competitive market with multiple offers on properties and a potential increase in property values in certain areas. As with the 2021 market, being ready with pre-approvals, viewing properties as soon as they hit the market, and making strong offers may be the key to getting the winning bid.
2. Affordability Concerns: While falling interest rates can enhance affordability, other factors such as rising home prices and limited housing inventory may counteract this effect. Affordability concerns could persist, especially for first-time homebuyers, despite the lower cost of borrowing.
3. Refinancing Activity: Homeowners who have not yet taken advantage of lower interest rates may continue to refinance their mortgages in early 2024, especially if rates remain favorable. This could provide homeowners with increased financial flexibility and potentially stimulate consumer spending.
4. Economic Conditions: Interest rates in early 2024 will likely be influenced by broader economic conditions, including inflation, employment trends, and government policies. There is a wide variety of opinions on where rates will end up at the end of next year. A Fannie Mae panel is predicting around 5.7% by year end, others are forecasting around 6%.
Falling interest rates have stirred optimism in the real estate community and we are hopeful that we have turned the corner. While the full extent of these developments will unfold in the coming months, I’m gearing up for 2024 and I am ready for whatever comes my way!
Sources: Curinos, Forbes