Thirty-year fixed mortgage rates have risen more than 260% since the year 2020, when the year ended with an average rate of 2.67%. But what can we expect moving forward?
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Thirty-year fixed mortgage rates have risen more than 260% since the year 2020, when the year ended with an average rate of 2.67%, according to national mortgage firm Freddie Mac.
Today’s average mortgage rate is 6.96%, which may seem high compared with 2020’s historically low rate, but it’s still below the average of 7.74% from 1971 to the present. Those who need a mortgage can be thankful it’s not October 1981, when the average rate reached 18.53%.
But what can we expect moving forward? Experts believe mortgage rates will fall moderately in coming months.
• Fannie Mae’s July Housing Forecast predicts the 30-year fixed mortgage rate will drop to 6.6% by the end of 2023 and 5.9% by the end of 2024.
• The National Association of Realtors expects the 30-year fixed rate will fall to 6.0% by year’s end and 5.6% in 2024.
• Bank of America Global Research predicts rates will drop to 5.25% by year’s end.
• The Mortgage Bankers Association forecasts that rates will be close to 5.5% by the end of 2023 and will drop a little lower next year.
For someone with a $500,000 mortgage, a decrease from 6.96% to 5.25% would drop monthly mortgage payments by $552. Such a drop could not only make housing affordable to more people, it would enable potential homebuyers to buy more expensive homes.
It could boost housing sales, which have fallen as rates rose. Many homeowners who want to move are reluctant to sell their existing home, because they would have to assume a higher rate on their new home. Sales of existing homes fell 18.9% in June from a year earlier.
Housing prices typically rise when mortgage rates fall, and fall when rates rise. But the modest predicted rate decrease may have little impact on prices, which have remained high as rates have risen.
The national median housing price fell 0.9% in June from a year earlier to $410,200, but even that small drop is little consolation to anyone seeking to buy a home in Mass., where the median price for a single-family home rose from $615,000 a year ago to $616,450 in May 2023, according to the Massachusetts Association of Realtors.
Prices remain high, in part, because Millennials have reached the age where they are buying homes. This generation of 72.4 million outnumbers Baby Boomers.
While demand for housing is high, supply is not keeping up. The number of new listings fell 26% in June from a year earlier, according to Realtor.com.
Inventory is low, not only because existing homeowners are reluctant to sell, but because it’s become difficult to build new homes. COVID drove the price of lumber and labor higher. Restrictive zoning and unavailability of buildable land have contributed to a lack of inventory.
Cheryl Eidinger-Taylor is the president and chief operating officer of ERA Key Realty Services, based in Northbridge.
