The Good News About Interest Rates For The Housing Market's Second Half Of 2024

When it comes to real estate, currently most of the U.S. is in a seller's market. This means that, because of the low inventory of houses available on the market, plus high home prices and high mortgage rates, sellers tend to have the upper hand over buyers. Right now it's typical for sellers to have multiple offers on their house from many hopeful buyers.

The good news about interest rates for the later part of 2024, though, is that mid-year, mortgage rates fell from 6.95% to 6.87% for the average 30-year fixed home loan. Realtors and other key figures in housing are hoping interest rates drop to less than 6% by the end of the year to best serve potential buyers. Despite this recent decrease, the market is still problematic for buyers and sellers alike. Lower interest rates boost the market overall. But with more buyers than sellers, there's still a lack of inventory, and so far, new construction isn't filling the gap.

The most crucial factor in residential real estate is the interest rate. A lower interest rate gives homebuyers more financial flexibility because it can save a buyer thousands of dollars over a 15 or 30 year mortgage. Interest rates are part of the problem. Owners who have a low interest rate on their mortgage, or have no mortgage left at all, are hesitant to move now since they could run into the buzzsaw of the housing shortage combined with a high interest rate when buying their next home. Even if they want to move, hesitancy on the part of long-term owners is creating a bottleneck for first-time buyers.

The best guess by experts in lending is that, for the rest of 2024, interest rates will remain above 7% for a 30-year fixed-rate mortgage and closer to 6.25% for a 15-year fixed-rate loan. Our own expert said the same in May, when Lindsey Schmidt at Fathom Realty in Virginia talked about upcoming trends for the rest of the year.

There's an old joke in the mortgage business: a loan officer can tell exactly what's going to happen to interest rates — they'll either go up or go down or stay the same. The corollary to this is that if someone is saying they know for sure what the market is going to do, they're not being truthful. It would be great if experts had a crystal ball or two to predict what's going to happen next in the housing market, but no such luck. In fact, interest rate predictions can often be wrong. They are based on a tool known as a dot plot, which Federal Reserve officials use to mark their predictions of the rise or fall of interest rates. However, critics complain that interest rate variables are more complicated than can be depicted in the dot plot. Additionally, once the forecasts have been made, there are many subsequent events that can render this data useless. 

Instead of prognostication, be smart about the steps you should take, whether you're buying or selling your home. In the meantime, if you're preparing yourself to buy a home soon, the National Association of Realtors reports that the demand for housing has steadily increased even though the actual purchase date may be delayed by people waiting for a lower interest rate.