Many “wannabe” buyers and sellers are attempting to read the tea leaves of the property market at the moment, trying to determine when mortgage costs will fall and how that event will impact the cost of homes.
Predictions earlier this year that we could expect up to four rate cuts before the Holidays – a prediction from Goldman Sachs among others – have proven wide of the mark.
Strong job figures and pressure on inflation has seen the Federal Reserve keep the interest rate in the 5.25% to 5.5% range.
This translates into 6%-7% retail mortgage deals for buyers needing their first loan or renegotiating an existing one because they sold and must purchase again.
As a consequence, many folks have stayed out of the market, especially existing homeowners who might otherwise have tried to either upgrade or downsize.
A ray of light has come from economists at Fannie Mae who now say we can expect two rate cuts this year and moderating home prices in 2025.
Fannie Mae – the Federal National Mortgage Association by its proper name – has made the following market observations, providing insight into what home buyers and sellers can expect in the next 12 months.
- The big Fannie Mae prediction: The Federal Reserve will cut interest rates this month and again in December.
- Inflation to fall to 2.9% by the end of the year, which will be within the Federal Reserve’s target range. This will give it little excuse not to cut rates in 2025 to stimulate the economy and boost the housing market.
- Price growth will moderate. Fannie Mae says 2024 will see an annual increase in values of 6.1% while 2025 will deliver a 3% hike, a figure reflecting the likelihood that more properties will come onto the market.
- Total home sales will be 4.81 million this year. For this year, the National Association of Realtors estimates 3.95 million sales will be made.
- The 30-year fixed rate mortgage rate will average 6.8% in 2024 and dip to 6.4% next year.
- Affordability and supply will vary from region to region depending on local economic strength. Fannie Mae reported that many urban areas in the Sun Belt now have as many if not more homes for sale than before the pandemic.
- As mortgage costs fall and values rise, America will see homeowners refinance $563 billion of loans next year. This will enable them to either release equity in their homes or move to cheaper mortgage rates.