Mortgage Rate News

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After the many rate hikes of 2023, the March FED meeting left their rate unchanged for the fifth consecutive meeting. They even confirmed three rate reductions in 2024.

Their rate is currently between 5.25% and 5.5%, but they only forecast lowering it three-quarters of a percentage point to arrive at 4.5% by years end.

We can probably expect a quarter point reduction in subsequent meetings during 2024.

Mortgage Rates Today

Since October 2023, mortgage rates have dropped one percentage point. Rates have remained above 6.5% and are currently at 6.87% for a 30-year-fixed-rate mortgage. The challenge presented by waiting for interest rates to come down is that when rates drop as they did through February, demand increases, which can drive home prices higher.

What a buyer may save in borrowing costs can be offset by paying a higher purchase price. At the same time, a buyer may recoup higher borrowing costs by purchasing when demand is lower.

The National Association of Realtors reported that sales of existing homes in February surged almost 10%. Inventory rose 5.9% year over year, but higher demand pushed the median price higher, up 5.7% year over year to $384,500.

“After decreasing for a couple of weeks, mortgage rates are once again on the upswing,” said Sam Khater, Freddie Mac’s Chief Economist. “As the spring homebuying season gets underway, existing home inventory has increased slightly and new home construction has picked up. Despite elevated rates, homebuilders are displaying renewed confidence in the housing market, focusing on the fact that there is a good amount of pent-up demand, an ongoing supply shortage and expectations that the Federal Reserve will cut rates later in the year.”

What Drives Mortgage Rates?

The FED rate doesn’t directly drive mortgage rates. However, they can determine the rates lenders are willing to offer. When mortgage volume decreases, lenders can reduce their rate to increase demand, regardless of what the FED is offering.

Inflation is the biggest driver of mortgage rates, which has remained above the FED's 2% target level. In the March meeting, the FED said that they want to see a few more months of low inflation and strong jobs report numbers prior to considering a rate cut.

Economists Adjust Rate Forecasts

Forecasters have adjusted their predictions for interest rates in 2024. Fannie Mae expected the 30-year fixed-rate mortgage to end 2024 at 5.9%. They changed this forecast to 6.4%. Most economists agree that hotter-than-expected inflation data will lead to a less aggressive rate-cutting path by the Federal Reserve.

Fannie Mae economists are predicting existing-home sales to trend upward this year. Their Home Purchase Sentiment Index revealed that 65% of homeowners say now is a “good time to sell.” Even while rates may hold steady, the number of buyers and sellers are expected to increase.

“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.”

In conclusion, if you are interested in purchasing a property in Lake Tahoe or Truckee, the change in interest rates over 2024 may be minimal. However, the level of demand today may be lower than what we will see in the summer of 2024. This means that now is a great time to list or buy a home.

Contact me today for information about the real estate market in Lake Tahoe.