Fannie Mae Revises Mortgage Rate Predictions for 2024

A short-lived drop in borrowing costs reversed this week, which could prompt a change in the type of buyer coming to the market this spring.

Mortgage rates moved higher this week, with the 30-year fixed-rate mortgage reaching a 6.87% average, Freddie Mac reports. Some economists are revising their rate predictions, looking for them to be higher this year than previously thought.

Fannie Mae was among them, this week saying it expected the 30-year fixed-rate mortgage to end 2024 at 6.4%, up from its 5.9% prediction earlier this year. Economists say strong job numbers and hotter-than-expected inflation data are leading financial markets to forecast a less aggressive rate-cutting path by the Federal Reserve. The Fed this week kept its benchmark interest rate steady but continued to suggest that three rate cuts are coming.

Nevertheless, Fannie Mae economists are predicting existing-home sales to trend upward this year. Its Home Purchase Sentiment Index recently showed 65% of homeowners say now is a “good time to sell,” a rising percentage.

“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” says Doug Duncan, Fannie Mae’s chief economist. “Still, while we don’t expect a dramatic surge in the supply of homes for sale, we do anticipate an increase in the level of market transactions relative to 2023—even if mortgage rates remain elevated.”

The National Association of REALTORS® reported Thursday that home sales in February were on the rise leading into the spring buying season. Existing-home sales jumped 10% in February, NAR reported.

Though recent rate jumps could make some prospective home buyers jittery, not all are so sensitive to the week-to-week changes, says Lisa Sturtevant, chief economist at Bright MLS. “The number of cash buyers has increased. In many markets, these cash buyers are not investors but regular home buyers who have accrued significant equity in an existing home that they can roll over into the purchase of a new home.” Indeed, NAR’s latest housing report showed one-third of existing-home sales in February were cash deals.

Given higher mortgage rates, Sturtevant predicts repeat buyers will make up a bigger share of the housing market in the months ahead. “First-time buyers will unfortunately have more buyers who they have to compete with as mortgage rates remain elevated,” she says. “The good news is that there should be more inventory coming into the market this spring.”

Freddie Mac reports the national averages for mortgage rates for the week ending March 21:

  • 30-year fixed-rate mortgages: averaged 6.87%, up from last week’s 6.74% average. Last year at this time, 30-year rates averaged 6.42%.
  • 15-year fixed-rate mortgages: averaged 6.21%, rising from last week’s 6.16% average. A year ago, 15-year rates averaged 5.68%.

Source: REALTOR® Magazine