Mortgage Rate Predictions and their Market Impact

In a recent Fox Business interview real estate titan Barbara Corcoran said that when mortgage rates drop there will be a major surge in the residential real estate market. In her opinion, the market has largely stalled because homeowners who would consider selling are likely paying historically low mortgage rates, so they are staying in their current homes instead of moving and taking on a 6%-7% rate. This is resulting in very low inventory, especially in places like Miami, so buyers who need to make a purchase are paying a premium for the properties that are available. Because of this, Corcoran said that, "The minute those interest rates come down, all hell’s going to break loose and the prices are going to go through the roof." She continued by saying, “[sellers are] staying put. But they’re not going to stay put if interest rates go down by two points.”

With that in mind, I looked into mortgage rate forecasts for the rest of 2023 and into 2024, and things are looking good. According to the National Association of Realtors, "mortgage rates will drop—with the 30-year fixed mortgage rate progressively falling to 6.0% this year and to 5.6% in 2024." Michael Fratantoni, chief economist at the Mortgage Bankers Association echoes this sentiment saying, "Our forecast is for a 30-year mortgage rate to be closer to about [5.5%] by the end of this year and drop a little lower next year." As of writing this post, 30 year fixed rates are hovering in the 7%+ range, so dipping down to 6% and then 5% should send the real estate market into a frenzy if Ms. Corcoran’s predictions are correct.

I understand that it is tempting to wait until these predicted mortgage rate drops transpire before dipping your toe into the real estate market as a buyer. However, I think that now is a great time to buy with less competition and lower prices. You can always refinance later!