Interest rates expected to drop to 5.5% in 2024: Survey
- High mortgage, interest rates have made homebuying a challenge
- Real estate, finance experts say there's a better outlook for 2024
- The office market continues to face difficulties
FILE – New homes in development in Eagleville, Pa., Friday, April 28, 2023. Homebuilders are stepping up construction of single-family homes following a steady decline in mortgage rates and broad expectation among economists that home loan borrowing costs will ease further in 2024. (AP Photo/Matt Rourke, File)
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(NewsNation) — Mortgage rates are expected to decline this year to 5.5%, according to a new Bloomberg survey of experts, a whole point lower than the current rate.
The survey, conducted among 236 respondents, reveals the rate on a 30-year fixed mortgage is expected to decrease to 5.5% by the end of the year, marking a substantial decline from the current rate of about 6.69%.
This projection signifies the first annual decrease after three consecutive years of rate increases.
High borrowing costs have previously hampered the real estate market, causing a significant drop in sales of existing homes and discouraging property listings. However, with the Federal Reserve hinting at potential interest rate cuts in the coming months, there is growing optimism that borrowing costs will ease.
57% of respondents now view real estate as a more attractive investment in 2024 compared to the previous year, according to the survey.
While owners have been hesitant to list their homes due to lower rates obtained before the rise in borrowing costs, recent data from Redfin Corp. suggests a slight loosening of the market. New listings rose by 2.2% compared to the same period last year, as 30-year rates eased off recent highs reached in October.
Despite these positive developments, only a small fraction of survey participants believe a 6% rate would significantly increase single-family inventory, while 39% consider rates around 5% sufficient.
However, challenges persist in other segments of the real estate market, with higher borrowing costs negatively impacting commercial property valuations and real estate investment trusts (REITs). About two-thirds of respondents anticipate REITs to underperform the S&P 500 Index in the current year.
The office market, in particular, continues to face difficulties, with 42% of respondents expecting a continued decline in demand and only 13% foreseeing an increase in office demand in 2024.