By Rob Wile -
NBC News
After hitting a post-pandemic high of 7.8% last fall, average 30-year mortgage rates are now expected to fall below 6% before the end of 2024, Fannie Mae analysts predicted.
The 30-year interest rate
is currently around 6.6%
.
Mortgage interest rates tend to go against the demand for US public debt.
This means that when demand for bonds increases, mortgage rates fall.
And thanks to the slowing economy, demand for bonds has increased.
Specifically, the 10-year Treasury yield has fallen almost 1% from its peak in October.
Image of a property for sale in South Pasadena, California, on January 17, 2024. Frederic J. Brown / AFP via Getty Images
"The outlook for both short-term [bond] rates and mortgage rates is now decidedly lower than we had previously anticipated," Fannie Mae analysts noted.
However, while the economy's growth is expected to remain below trend this year, analysts said they were removing an "explicit forecast" of a recession in 2024. This forecast is the result of
conditions "looser" finances
– meaning lending is less restrictive – and that income growth has outpaced the rate of inflation.
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Refinancings are already increasing as a result of falling interest rates, and are expected to help "unfreeze" the existing home sales market, currently affected by the so-called lock-in effect, whereby homeowners who want to sell cannot to do so because buying a new home would be too expensive for them.
Analysts warn, however, that the real estate market is still a long way from stabilizing.
“Full recovery to pre-pandemic sales pace is expected to take years,” they stated, “as housing affordability remains extremely low based on historical household income levels.”
As a result, according to a forecast from financial services company CoreLogic, the median home price in the United States
will only grow by around single digits this year
.
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The modest projection indicates a gradual recalibration of a real estate market subjected in the past to strong demand-induced swings, which sent prices skyrocketing just a few years ago.