When are experts predicting a drop in mortgage rates?

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When should mortgage rates start to fall?

In a recent discussion with CBS News, multiple experts offered their take on when they think mortgage rates will finally ease up.

Christopher L. Stroup, a financial advisor at Abacus Wealth Partners, stated, “Many mortgage rate forecasts from leading institutions don’t predict a drop to 6% or below until the end of 2024 or early 2025.”

Travis Saling, a loan officer at Fairway Independent Mortgage Corporation had the following to say, “The Fed increased rates to help slow inflation and it’s worked. My prediction would be [mortgage rates] moving into the low 6% range by the end of next year and into the 5% range by 2025.”

Kevin Leibowitz, president and CEO of Grayton Mortgage, predicted, “I don’t think that we’re going to see lower mortgage rates until sometime next year – second half? When rates dip, I think they’ll be in the 6% to 6.5% range. Perhaps, a bit below 6%. But, I don’t anticipate rates getting to sub-5% any time soon.”

It looks like we could be stuck where we’re at for a few more months, but this market has shown it’s a challenge for even seasoned veterans to predict.

How sticky is inflation in the housing market?

According to the latest inflation data, housing costs actually eased a bit in August, but not enough to help bring inflation down to the 2% target the Federal Reserve has set.

The shelter piece of the Consumer Price Index, or the metrics that measure how much goods cost, was up 0.3% in August compared to July. That’s down slightly from 0.4% increases in June and July.

Comparing year-over-year numbers, shelter was up 7.3% compared to the same time last year. That’s actually the lowest increase in year-over-year data since November 2022.

The Federal Reserve’s goal of 2% inflation is attained, in part, by hiking interest rates and making it more expensive to borrow money. However, increasing interest rates impacts the bond market, which affects mortgage rates. Increased mortgage rates lead to higher housing costs.

When asked about this dilemma, Selma Hepp, CoreLogic’s chief economist, stated “Unfortunately, continued inflation pressures and Fed’s laser focus on lowering it means that mortgage rates may remain elevated for longer and not fall below 6% by the end of the year which will continue to hold many potential homeowners back who are not willing to give up their low mortgage rate and sell their property.”

Where are the safest & riskiest housing markets?

Recent data from real estate firm ATTOM has identified the riskiest and safest areas to buy a home. ATTOM based its report on home prices, average local wages, the percentage of home foreclosures in an area, home affordability, underwater properties, unemployment rates, and other factors in the second quarter of 2023.

ATTOM CEO Rob Barber stated, “We continue to see pockets of the U.S. housing market where the foundation is a bit shakier—or more solid—than others. It doesn’t mean any one area or cluster of areas is about to crash. The overall market and the economy remain way too strong for imminent warnings to be sounded. But there are weak spots that are still popping up as areas to watch, especially if the market turns back downward.”

Which areas are rated as risky by ATTOM? New Jersey and Illinois were home to 23 of the 50 most vulnerable counties in the country.

When it came to the safest areas, the South and New England areas had the majority of the least vulnerable counties in the country. Virginia is has the most stable markets in the country with six counties rated as the least at-risk. Massachusetts came in second place with five.

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