Mortgage Rate Outlook: Ready to Take Advantage of Lower Interest Rates?

The mortgage market has made a promising shift! Mortgage rates are gradually decreasing from their near-8% peak last Fall, making homeownership more accessible for those wishing to buy. The average rate on a 30-year fixed mortgage first retreated under 7% in July thanks to a brighter June inflation report.

That favorable trend continued into August, bringing the national average 30-year fixed rate solidly under 6.5%, where it has been hovering as the market waits for continued developments on both inflation and the health of the economy.

Inflation still sits a bit higher than the Federal Reserve’s 2% target, but continuing to trend in the right direction. Coupled with signs of weakness in the job market, the Fed chairman indicated in late August that they’re finally ready to start cutting rates in September.

Keep in mind that bond rates and mortgage rates have recently fallen in the absence of a Fed rate cut -- more appropriately, in anticipation of a Fed rate cut. That means any Fed action in September may only have a small effect on mortgage rates.

Home prices are finally stabilizing, after a period of rapid escalation that began in 2021, providing additional relief to potential buyers. The inventory of homes for sale remains tight, though experts predict increased supply as the year progresses.

But if you’re waiting for home prices to dip, you may end up waiting a really long time. With just over 26% of adult Gen Z’ers owning a home in 2023 and Millennial homeownership standing at 55% (compared to Gen Z and Boomer homeownership at around 70%), the expected generational demand will continue to exceed the supply, keeping a floor under prices.

“The recent decline in rents means Gen Z’ers can put more money toward saving for a down payment. Plus, the job market is strong, and career opportunities have become less concentrated in expensive cities during the remote work era, meaning many Gen Z’ers can choose to live somewhere more affordable,” said Daryl Fairweather, Chief Economist for online real estate firm Redfin.

How are lower rates affecting the market?
Thus far, the lower rates we’re seeing haven't brought buyers into the market in any significant way. That said, as rates continue to improve, we do expect a gradual shift towards a more active market in the latter half of 2024 and into 2025.

If you're in a position to move up or downsize, it might be better to make a move while things are relatively quiet, rather than wait and battle it out with other buyers entering from the sidelines. Let’s get in touch and set up a time to review how the improving market conditions can support your real estate ownership goals.

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