Will Interest Rates and Home Prices Come Down Soon?

Dated: April 15 2024

Views: 322

By Jade Goodhue

What’s Going on with Interest Rates and Home Prices in 2024?

 

Whether you’re a buyer or seller in SE Wisconsin, you’re probably keeping a close eye on interest rates and home prices… Why?

 

  • Existing home supply will likely increase when mortgage rates decline later in 2024 as the mortgage rate lock-in effect begins to diminish. 

  • Elevated rates were meant to put downward pressure on prices, however low supply has been counteracting the Federal Reserve’s best efforts by continuing to place upward pressure on home prices. 

 

Source: St Louis Fed Reserve

When Will Mortgage Rates Go Down?

 

Don’t expect to see a rate cut by the Feds until Q3 of this year. The National Association of Home Builders (NAHB) is forecasting just two rate cuts this year from the Fed: one in the third quarter and another in the fourth quarter. However, the bond market is now expecting three rate reductions. And with an uptick in inflation, the Feds face a tough choice on whether to raise rates or keep it as is.

 

Mortgage interest rates continue to hover in the high-6% range as markets wait for inflation data that will allow the Federal Reserve to ease monetary policy. They’ve held the federal funds rate at 5.5%, where it has been since July 2023. Fed officials noted that they need to see additional inflationary improvement before cutting interest rates as they see the cutting of rates too early rather than too late as a greater policy risk. The Fed believes the economy is more capable of absorbing "higher for longer" rates than in prior projections due to improving labor markets and stronger GDP forecasts for this year.

Will Foreclosures Go Up This Year?

 

No, foreclosures aren’t likely to rise this year I’ve been advocating for over a year now that there won’t be a housing market crash for over a year now, and it still hasn’t come. This is a very unlikely scenario because of the stringent lending standards. National 30-day delinquencies have hovered steady around 2.8% and foreclosure rates are still hovering around 0.3% as of January of 2024.

 

Source: CoreLogic

Bottom Line - When Will Home Prices Come Down?

 

Not anytime soon…. The expectation is that when the Feds lower interest rates, home prices will come down because it’ll end the lock in effect, however, this isn’t necessarily the case. Homeowners are indeed reluctant to sell their homes thereby trading sub 4% interest rates in for a high 6% rate. However, lower rates could also reignite demand during a continuing housing shortage there driving up prices. In other words:

 

  • High rates were supposed to push home prices down, but it’s pushing prices up demotivating home sellers from wanting to trade in low rates for high rates. 

  • Lower rates will push prices up again because home buyers who are on the sideline will flood back into the market creating more demand. So while more homes will likely be for sale, the larger demand will absorb it.


If you’re looking to sell or buy a home in SE Wisconsin, give us a call or text at 262.204.5534 or email me at jade@legendaryrealestateservices.com.

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Chris Devincentis & Jade Goodhue

Jade and Chris co-founded Legendary Real Estates Services during the start of the 2020 pandemic. With Chris’s background as a real estate agent and broker since 1990, and Jade’s background....

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