Since June 2023, the 30-year fixed mortgage rate has maintained a level above 6.6%. Some forecasts are now speculating a potential drop to low-6% by the close of 2024, aiming to inject affordability into the housing market.
Delving into the figures, the median sales price for existing single-family homes stood at $387,000 in December 2023. Forecasts suggest a 2% appreciation in prices throughout 2024, projecting the median home price to reach $394,740. However, if prices surge at a faster rate, such as 5%, driven by robust housing demand, the median house price could escalate to $406,350.
Various year-end mortgage rate scenarios, ranging from 6.0% to 6.6%, are illustrated in the table below, along with corresponding monthly mortgage payments. These calculations assume a 20% down payment and do not account for property taxes, PMI, home insurance, and HOA fees.
If prices appreciate by 2% by the close of 2024, rates will need to drop below 6.4% to result in lower mortgage payments compared to the current scenario. In the case of a 5% price appreciation, rates would have to dip below 6.1% to elicit a reduction in mortgage payments. (Cells colored in green depict scenarios with improved affordability.) The probability of rates dropping to 6.3% or lower appears slim at present. Conversely, if median home prices either decline or remain stable, even a modest drop in rates would be a welcome development for potential home buyers.
