This weekend, ResiClub PRO members will receive research articles examining property taxes and regional home price overvaluation/undervaluation estimates.
Economic forecasting has never been an easy task, and it becomes even more challenging when confronted with unprecedented economic events like COVID-19 lockdowns and unparalleled levels of government intervention, followed by a rapid cycle of interest rate hikes.
Look no further than recent mortgage rate forecasts. Last year marked the second year in a row, mortgage rate forecasters at large have missed—big time. That raises the question: can we trust mortgage rate predictions at all right now?
ResiClub’s latest roundup of quarterly mortgage rate forecasts shows that most forecasters still expect mortgage rates to gradually decrease over the next 18 months. One reason being that as the Federal Reserve begins to cut rates, the bond market is expected to become less volatile, leading to a slight decline in mortgage rates.
The average 30-year fixed mortgage rate as of Friday is 6.91%.
By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. While Wells Faro’s model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.
IF those forecasts come to fruition (Note: ResiClub takes all forecasts with a grain of salt), it’d mean that housing affordability would still remain strained in 2024 and 2025.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024… Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we'd previously forecast, as markets continue to evolve their expectations of future monetary policy. 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,” wrote Doug Duncan, chief economist of Fannie Mae, on Tuesday.
A new report by John Burns Research and Consulting (JBREC) shows year-over-year rent growth for different categories throughout the build-to-rent sector.
According to JBREC, rents for horizontal apartments are down (-3.0%) on a year-over-year basis. While rents for single-family detached homes (+1.0%), townhomes (+2.0%), single-level rowhomes (+3.0%), and mixed communities (+5.0%) all slightly edged up on a year-over-year basis.
Last week, the National Association of REALTORS (NAR) reached an agreed settlement in the commission lawsuit. The proposed settlement, which is still subject to court approval, involves a payment of $418 million in damages and amendments to several rules. According to NAR, as part of the agreement, “NAR has agreed to put in place a new MLS rule prohibiting offers of broker compensation on the MLS.”
To better understand how this could impact the residential real estate industry heading forward, ResiClub is running a series of opinions from insiders across the industry. (Sharing the commentary doesn't mean ResiClub endorses the commentary).
Today, we’re featuring commentary from Nick Narodny, founder, and CEO of the Sequoia Capital-backed real estate marketplace Aalto. This was originally posted on LinkedIn.
“FIRST: I think the DOJ will reject this settlement** They’ve already stated that they want commission to be fully decoupled when they rejected the MLS PIN settlement. This settlement does not do that; sellers can still pay buyer commission. That said there is so much press, they may be under too much pressure to reject so... IF the settlement goes through. Here are some of the things that may happen. Note: these aren't all my hot takes and I'm certainly not 100% confident in them but most articles you read are missing the point: 1) The commission rate isn't going to change much for next year or so - just because the buyer commission isn’t on the MLS, doesn’t mean listing agents won’t tell their buyers to offer it 2) Brokerages will ask agents to get buyer/broker agreements - where the buyer agrees to pay the full fee, even if the seller doesn’t agree in the offer. Brokerages are already doing this. This will cause lots of ripple effects but I'm not sure what they are yet 3) The Majority of offers will be submitted with "full" buyer's broker commission - and the listing agents will suggest that their client accepts it 4) Brokerages will hoard listings - One of the main values of the MLS for brokerages is “cooperating compensation.” Without that, brokerages may start to post listings only to their own website or internal database to drive traffic and buyers to their brand 5) Everyone leaves NAR in the next 3 years - if MLSs lose relevance there is no reason to pay fee. We may see some new brokerage-sharing membership that does the same thing NAR was doing with sharing of commissions and listing info. Bringing us right back to where we are today. 6) Eventually, many buyers will just go to the listing agent - buyers won’t sign the agreement so they wait and when the right home comes along they just go to the listing agent 7) Zillow starts to layer StreetEasy features nationwide - As MLS loses power you can bet Zillow will be making a play and it will look like the way StreetEasy works in NYC,” wrote Narodny.
FAQs
The average 30-year fixed mortgage rate as of Thursday was 6.99%. By the final quarter of 2025, Fannie Mae expects that to slide to 6.0%. Meanwhile, Wells Fargo's model expects 5.8%, and the Mortgage Bankers Association estimates 5.5%.
Where will mortgage interest rates be in 2025? ›
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
Where will interest rates be in 2026? ›
The nation's top economists say the Fed is most likely to keep interest rates higher than 2.5 percent — often considered the “goldilocks,” not-too-tight, not-too-loose level for its benchmark federal funds rate — until the end of 2026, Bankrate's quarterly economists' poll found.
Where will interest rates be in 2027? ›
Futures indicate that short-term interest rates will bottom out at about 3.75% in 2027, while the median forecast among members of the policy-making Federal Open Market Committee is 2.6% — more than 100 basis points lower.
What will interest rates look like in 5 years? ›
An interest rate forecast by Trading Economics, as of 12 May, predicted that the Fed Funds Rate could hit 5.25% by the end of this quarter - a forecast that has been materialised. The rate is then predicted to fall back to 3.75% in 2024 and 3.25% in 2025, according to our econometric models.
What will the interest rates be in 2025? ›
That would bring the federal funds rate to 4.75% to 5%. Don't expect rates to start dropping much faster after that. By April 2025, there's a 80% probability that the Fed's rate will be 4% or higher, according to the CME FedWatch tool, which uses futures pricing to predict rates.
What are interest rates predicted to do in 2025? ›
Current Situation. The Fed is currently raising interest rates to counteract inflation. The policymakers expect rates to stay above 5% in 2024 and around 4% by the end of 2025.
Where will mortgage rates be in 10 years? ›
According to their latest forecast for 30-year mortgage rates in October 2023, they expect them to range from 7.40% to 7.86%, with an average of 7.63%. They also predict that mortgage rates will peak at 9.41% in May 2024, before gradually declining to 3.67% by November 2027.
Will mortgage rates ever be 3% again? ›
In summary, it is unlikely that mortgage rates in the US will ever reach 3% again, at least not in the foreseeable future. This is due to a combination of factors, including: Higher Inflation: Inflation is currently at a 40-year high in the US, and the Federal Reserve is raising interest rates to combat it.
What will the interest rate be in 2030? ›
Last year, the White House projection for bill rates in 2030 was 2.4%. Such a level would be much higher than has been typical since the turn of the century. Three-month bill rates averaged around 1.5% over that period.
The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. Here's where mortgage interest rates are headed for the rest of the year and how that will impact the housing market as a whole.
What will 30-year mortgage rates be in 2026? ›
The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.
How low will mortgage rates go in 2024? ›
Mortgage rate predictions 2024
The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.4% to 6.7% range throughout the rest of 2024, and Fannie Mae is forecasting the same. NAR believes rates will average 7.1% this quarter and fall to 6.5% by the end of 2024.
Will interest rates go down in 2026? ›
Driving the news: The median Fed official now expects interest rates to be somewhat higher in 2025 and 2026 than they did in December — anticipating fewer rate cuts will be justified in the coming two years. The median projection for the longer-run rate also ticked up, to 2.6% from 2.5%.
How much longer will interest rates continue to rise? ›
Mortgage rates may continue to rise in 2024. High inflation, a strong housing market, and policy changes by the Federal Reserve have all pushed rates higher in 2022 and 2023.
Should I fix my interest rate for 5 years? ›
Plus, if rates decline over the next two years, it means you can then move onto a new rate once your deal ends. Fixing your mortgage for 5 years can give you certainty over a longer period of time, which can be better if you plan on staying in the property for a long time.
Will mortgage interest rates go down in 2025? ›
In its latest U.S. Economic Outlook, the Economics Group of Wells Fargo Bank puts the 30-year conventional mortgage rate at 7.05% in the second quarter of 2024, declining to 6.5% by the end of the year. Wells Fargo economists predict that the average rate will dip below 6% in the fourth quarter of 2025.
How much will mortgage rates go down in 2024? ›
While McBride had expected mortgage rates to fall to 5.75 percent by late 2024, the new economic reality means they're likely to hover in the range of 6.25 percent to 6.4 percent by the end of the year, he says.
