Fannie Mae Updates 2024 Mortgage Rate Forecast

This week's brief dip in borrowing costs was reversed, potentially altering the profile of spring market buyers. Mortgage rates climbed, with the 30-year fixed-rate average reaching 6.87%, Freddie Mac reports. Consequently, some economists are adjusting their rate predictions upward for the year.

Fannie Mae, among them, now forecasts the 30-year fixed-rate mortgage to close 2024 at 6.4%, up from an earlier prediction of 5.9%. Strong job numbers and higher-than-expected inflation are causing financial markets to anticipate a less aggressive rate-cutting path from the Federal Reserve, which held its benchmark rate steady this week but indicated three future rate cuts.

Despite higher rates, Fannie Mae economists expect existing-home sales to rise this year. Their Home Purchase Sentiment Index revealed that 65% of homeowners believe it's a good time to sell, an increasing trend.

Doug Duncan, Fannie Mae’s chief economist, states, "The housing market will likely continue facing high home prices and elevated interest rates in 2024. While we don't foresee a dramatic increase in home supply, we do anticipate more market transactions compared to 2023, even with high mortgage rates."

The National Association of REALTORS® reported a 10% increase in February home sales, signaling an active spring buying season. Although recent rate hikes may unsettle some prospective buyers, many are less sensitive to week-to-week changes. Lisa Sturtevant, chief economist at Bright MLS, notes an uptick in cash buyers, many being regular buyers leveraging significant equity from existing homes.

Sturtevant predicts a larger share of repeat buyers in the market due to higher mortgage rates, with first-time buyers facing more competition. "The good news is more inventory should come onto the market this spring," she adds.

Freddie Mac’s national mortgage rate averages for the week ending March 21 are:

• 30-year fixed-rate mortgages: 6.87%, up from 6.74% last week. A year ago, rates averaged 6.42%.
• 15-year fixed-rate mortgages: 6.21%, up from 6.16% last week. A year ago, rates averaged 5.68%.