31% of Americans Expect Mortgage Rates to Fall in 2024, Boosting Housing Sentiment

A recent Fannie Mae survey indicates that a greater number of Americans than previously think that this year will see a decline in mortgage rates. December's consumer sentiment was more upbeat than November's, with 31% of respondents believing that interest rates on home loans will decrease over the course of the next year. Mortgage rates were expected to rise by the same percentage of respondents, while 36% said they would remain roughly the same.

According to Mark Palim, Deputy Chief Economist at Fannie Mae, renters had less confidence regarding rates than homeowners and higher-income groups. In particular, he said that a higher proportion of homeowners anticipate a decrease in mortgage rates than an increase. This marks a first in the history of the Fannie Mae National Housing Survey.

According to Fannie Mae, the rate on a typical 30-year fixed-rate mortgage has decreased to 6.62% from over 8% in November.

The key question for 2024 for prospective homeowners, sellers, and refinancers is how low mortgage rates may go. In December, Federal Reserve officials hinted that they would lower the benchmark rate three times this year. According to Realtor.com, the majority of real estate professionals believe that rates will stay in the 6% area.

Mortgage Rates and Homeownership Sentiment: Factors and Projections

Mortgage rates typically follow the yield on the 10-year U.S. Treasury bond, albeit they don't always reflect the so-called federal funds rate. Treasury note, which is impacted by the monetary policy decisions made by the Fed. Home loan rates are also influenced by investor forecasts regarding future inflation and the demand for Treasurys globally.

Even while more Americans are feeling upbeat about decreasing mortgage rates, they are still rather pessimistic about their chances of becoming homeowners. Merely 17% of respondents to a Fannie Mae survey believe that now is a good time to purchase a home. According to Redfin, the median price of a home in the United States as of November was over $408,000, a 3.6% increase over the previous year.

However, Palm suggests that even a little movement in the market toward the expectation of lower mortgage rates might spur homeowners to put their houses up for sale, increasing the supply of existing homes in the upcoming year.

A decline in mortgage rates is another forecast by several real estate specialists for the upcoming year. In a research published on January 5, Capital Economics property analyst Thomas Ryan said that lower mortgage rates are anticipated, which would probably result in an increase in the supply of homes as the prior rate "lock-in" unwinds.