U.S. Mortgage Rate Predictions for 2024

WASHINGTON (Reuters) – The National Association of Realtors (NAR) predicts that the average rate for the popular 30-year fixed-rate mortgage will be around 6.0% next year. This rate is expected to boost new housing construction and stimulate demand for previously owned homes.

The NAR forecasts 4.5 million existing home sales in 2025 and an increase in house prices by about 2%, estimating a median existing home price of $410,700.

According to the NAR, if rates stabilize around 6%, 6.2 million households could afford median-priced homes, compared to the current conditions with rates near 7%.

The housing market faced mixed outcomes due to the Federal Reserve's aggressive monetary policy tightening between March 2022 and July 2023. Sales of previously owned homes significantly declined as higher mortgage rates deterred many owners from listing their properties. Many homeowners currently have mortgage rates below 5%, which has exacerbated the supply shortage and increased home prices, making it difficult for prospective homeowners to enter the market.

In response, builders have begun constructing smaller homes, attracting buyers to new constructions and consequently boosting new home sales.

Since September, the U.S. central bank has cut interest rates twice and is expected to implement a third reduction soon. However, the 30-year fixed-rate mortgage remains close to 7%, reflective of the yield on the 10-year U.S. Treasury note, which has risen due to economic resilience and concerns that the President-elect's planned policies may induce inflation.

The NAR forecasts 1.45 million housing starts next year, mainly for single-family units.

“Lower rates can significantly benefit homebuilders by reducing financing costs and boosting market confidence,” stated the Realtors group. “However, inventory levels are still expected to fall short of pre-pandemic norms, continuing to present challenges for buyers.”