Last week was a game changer for rates so I want to make sure that you as a first-time homebuyer are prepared for what's going to happen in 2024. I'm going to show you two video clips: one from mortgage news daily as to where interest rates will probably go in 2024 if inflation continues to go down, and what Jerome Powell, the head of the Federal Reserve, said last week about interest rates and how quickly these interest rates are going. And I'm going to give you three tips so you're prepared to buy in 2024.
Projecting Rate Cuts in 2024
In 2024, so let's start with this. This is what Jerome Powell said about potentially cutting rates in 2024. FC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward. While participants do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table if the economy evolves as projected. The median participant projects that the appropriate level of the federal funds rate will be 4.6% at the end of 2024, 3.6% at the end of 2025, and 2.9% at the end of 2026.
So basically what he's saying in that, and there's a Dot Plot, is that most people are projecting that they're going to reduce rates in 2024. So right now, the federal funds rate is at about the low fives and they're predicting it's going to be in the fours. That's not exactly what mortgage rates are, but as the Federal Reserve raised interest rates, mortgage rates went up, as they lower interest rates, mortgage rates went down. So it's all going to be what's going to happen with inflation, and right now inflation is going toward at least that 2% Target so that's why they're talking about potentially cutting interest rates now.
Mortgage News Daily's Perspective: Prospects of Rates in the 4% Range
This interview that CNBC did with one of the heads of mortgage News Daily that gives the average mortgage rates, he talked about rates possibly even getting into the 4% range. Let's watch that now. There's no reason rates couldn't go down into the fives, possibly even high fours if, you know, some of the talking heads are right about recession in 2024.
That's not unreasonable to think that we could see that territory that quickly, but it really depends on economic data, chiefly inflation getting to the 2% Target so some of you are even saying that it might reach high four so you need to get prepared because what's happening is happening relatively fast.
Current Trends and Implications: Observing Rate Fluctuations
So last week Monday on December 11th, this is Monday December 18th, the conventional, the average conventional 30-year rate was 7.10. Today, today is at 6.65 and for FHA rates last week Monday, the average was 6.43, now the average is 6.12 and if you remember I did some videos a little while back, it said 5.5% was the rate in which most buyers surveyed would get back into the market. We are approaching that, definitely approaching that as we get into 2024 so you need to be prepared for these rates going lower and in order to prepare, there's some things that you know I'm sure you're in the holiday spirit the end of the year looking forward to new years' but you want to if you are going to buy in 2024 you want to make sure that you have three things a preapproval.
Preparation Strategies: Getting Ready for Potential Rate Drops
You want to go ahead and get pre-approved now, so when you're ready to buy, you have all of that worked out. If there's anything that you need to work out on your pre-approval, you want to be prepared, preapproved, so when rates hit where they need them to be as far as affordability, you're ready to buy. You have to have those conversations with your lender now. Do not wait until you're under contract to talk about interest rates because there is a strong chance your interest rate will be lower from the time you go under contract to the time you're about to close. And then lastly, affordability is huge. You do not want to - one thing that he said in that video if you are paying close attention, he said if we approach recession, rates will go even lower. So if we approach recession, it may not be a deep recession, but what typically happens during recessions is that people lose their jobs.
Right now, we have strong unemployment, we're at 3.7%, but you want to be very, very cautious. You want to make sure you have your emergency fund. You want to make sure that you are, you know, your employment is stable. You want to make sure that you are buying a home that is less than 35% of your take-home pay. I have a video of that too. 25% would be ideal. 35% should be your max. But make sure that you are planning for that in 2024 and you're not just rushing to buy as soon as interest rates go down. You want to make sure you still can afford that mortgage. You want to make sure you can afford it with a lot of wiggle room because if we don't go into recession, that's another thing you have to think about. I hope this was helpful. See other stories from your Authoritative Mortgage Network