The U.S. housing market is still trying to recover from its post-pandemic slump when mortgage rates spiked and sent many would-be buyers to the sidelines with climbing asking prices and expensive mortgage payments.
What happens moving forward with mortgage rates will be key to the housing market’s recovery. Slight shifts in rates in 2024 have prompted“Despite just a modest drop in rates, consumers clearly have responded as purchase demand has noticeably improved. The responsiveness of prospective homebuyers to even small changes in rates illustrates that affordability headwinds persist,” Freddie Mac chief economist Sam Khater said in a release.
Most economists are projecting mortgage rates to fall somewhere in line with 5% to 6% over the next two years. That would be significant improvement from the current situation facing buyers but would still be far above the COVID-era rates beneath 3% and even higher than what was available for most of the 2010s, potentially leaving the housing market and buyers in a tough position.
Small dips in rates have spurred activity in 2024 that could grow if 30-year mortgage rates get to 6% or below. TD Bank projects rates will start to moderate more meaningfully by the middle of next year, falling to around 5.8% by the end of 2025 and settling around 5.5% in 2026.
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