Will Mortgage Rates Go Down in 2024? // Mortgage Interest Rates Forecast

Forecasting Mortgage Rates for 2024: Insights and Predictions for Home Buyers and Investors

As we step into the future of real estate and finance, a pressing question on everyone's mind is: What will mortgage interest rates look like in 2024? Jeff Smith, CEO and loan officer at Tiger Home Loans, with 17 years of experience in the mortgage industry, shares his expert insights. This video dives into the factors influencing mortgage rates, providing clarity and guidance for potential homebuyers and investors.

Historical Context and Recent Trends:
November 2023 marked a historical moment in the mortgage industry, witnessing the most significant improvement in mortgage rates in 40 years. This shift can be attributed to several factors, including changes in inflation, governmental policies, and global economic trends.

The Role of Inflation and Government Policies:
Mortgage rates have traditionally been closely tied to inflation. Post-COVID, with the end of low rates and easy monetary policy, we saw a substantial rise in inflation due to government spending and relief programs. This increase in inflation led to a hike in mortgage rates as they align closely with long-term bond rates, which are sensitive to inflation expectations.

The Impact of the Federal Reserve's Actions:
The Federal Reserve's rate hikes aimed to control inflation indirectly influenced mortgage rates. However, an interesting observation made by Smith is that despite a decrease in inflation in the past year, mortgage rates remained high, contrary to historical patterns. This anomaly can be linked to the resilience of the economy, despite rate hikes, and an enlarged money supply by 40% during COVID-19.

Predictions for 2024:
Looking ahead, there are expectations of a slowdown in the U.S. economy, with jobs numbers weakening and the Federal Reserve potentially ending its cycle of rate hikes. This could lead to a significant drop in mortgage rates. Smith anticipates that we might not see rates as low as 3% unless triggered by an unforeseen event, but there's a strong likelihood of continued improvement in rates, particularly if the Fed implements cuts in 2024.

Opportunities in the Mortgage and Real Estate Markets:
This evolving landscape presents a unique opportunity for those in the mortgage business and potential homebuyers. Lower mortgage rates are expected to heat up the real estate market, driving demand for home purchases. For buyers, locking in rates now with the possibility of refinancing later at a lower rate seems to be a strategic move.

Conclusion:
As we navigate through these changing economic times, understanding the dynamics of mortgage rates is crucial for making informed decisions in the real estate market. While certain factors like global events and policy changes remain unpredictable, the current trends and expert predictions point towards a more favorable environment for mortgage rates in 2024.

Important Links & Info:
Follow Jeff:
Instagram: https://www.instagram.com/jeffsmiththl/
Facebook: https://www.facebook.com/profile.php?id=100002927397116
LinkedIn: https://www.linkedin.com/in/jeff-smith-40627016/

Jeff Smith - Tiger Home Loans
📲 480.909.4000
📩 [e-mail]
🔗 www.tigerhomeloans.com
E

Important Links & Info:
Follow Jeff:
Instagram: https://www.instagram.com/jeffsmithaz/
Facebook: https://www.facebook.com/profile.php?id=100002927397116
LinkedIn: https://www.linkedin.com/in/jeff-smith-40627016/

Jeff Smith - Tiger Home Loans
📲 480.909.4000
📩 [e-mail]
🔗 www.tigerhomeloans.com
Equal Housing Opportunity
Tiger Home Loans NM

Episode Transcript

Speaker 1 (00:04):
Welcome to the show fairways and finance.
My name is Jeff Smith.
I've been in the mortgagebusiness for 16 years top
quarter percent L O nationwide,and you know this podcast.
We want to talk about yourfinances, how to grow and
accumulate wealth and all thingsrelated to the mortgage
industry.
But we're golf lovers here aswell, so we're going to work in
some golf.
Don't worry for my golf loversout there.

(00:26):
We got you and I hope you enjoythe show.
For those of you who thoughtmortgage rates would just
continue to climb in perpetuityand climb into 2024, you want to
listen to this episode becausewe're just coming off of the
month of November 2023.
And that was the best month formortgage rates in the last 40

(00:48):
years, and there's a lot goingon in the markets that are
influencing that.
My name is Jeff Smith, ceo andloan officer of Tiger home loans
.
I've been in the mortgagebusiness for 17 years and as a
mortgage broker, you know thatgives me the ability to offer
the lowest rates in the industry, which we have here at Tiger
home loans, and so I'm dedicatedto helping my clients secure

(01:08):
the best rate, have the bestexperience and, most importantly
, get the product that fitstheir needs the most, and so
today I'd like to talk to youabout interest rates and what's
going on.
So we had November best monthwe've had for rates in 40 years.
We saw a significantimprovement in mortgage rates
during the month of November.

(01:28):
Rates were down over 1%, aboutone and a quarter percent over
that 30 day span.
And so you know, when we lookat at rates in a bigger picture
view, mortgage rateshistorically track inflation.
And so when we rewind back tothe end of COVID and the end of

(01:50):
the Fed pumping low rates andeasy monetary policy into the
economy and we started to seerates rise, what happened at
that time was inflation hadgotten out of hand.
Inflation increasedsignificantly after two years of
basically free money in theeconomy, with the government
printing a ton of money toprovide COVID relief programs,

(02:13):
covid compensation and incomereplacement.
Low, low interest rates thatwere effectively 0% rates.
All of that really juiced upthe economy and then, with the
economy juiced up, it ramped upinflation.
And so then, as inflationstarted to increase, the Fed

(02:34):
pivoted very quickly and theystarted hiking rates, and so
mortgage rates as inflationstarted rising.
Mortgage rates started risingbecause mortgage rates,
mortgages turn into long-termbonds and long-term bonds are
most heavily influenced byinflation and what the
expectation of inflation is forthe near term.

(02:55):
So as we got toward the end ofthis cycle, mortgage rates start
rising, the Fed startsincreasing rates to try to slow
down the economy.
We saw mortgage rates trackinginflation and inflation got over
10% by some of the metrics thatyou can look at.
And then the Fed was hikingrates, not to increase mortgage

(03:17):
rates, but they were hikingrates to increase other rates
throughout the economy, whichthen slows down the economy.
And so a slower economy wouldhave less inflation and that
would help to bring mortgagerates down in a normal scenario.
But what we saw take place wasthat the government had borrowed
so much money, the money supplywas significantly increased,

(03:42):
and when the government borrowsmoney, they have to do it by
issuing debt.
So they sell bonds, treasurybills, which are bonds, and
those bonds are a form of debtto the US government.
That's how they get money tofinance the operations of the
government.
So, as the government addedmore supply of debt to the

(04:02):
markets, that put a lot ofpressure on rates to move higher
, and specifically bond rates.
And then you know, indirectly,mortgage rates.
And so, even though inflationstarted coming down last year
and we've seen a significantimprovement in inflation.
Last year, from really like Juneof last year all the way

(04:24):
through to June of this year,inflation was down more than 50%
, so it's a humongous increase.
Now, from June of last year toJune of this year, we didn't see
an improvement in mortgagerates, and actually mortgage
rates were higher June this yearthan they were June last year.
So what was going on with that?
Well, you had the economy,which has remained really

(04:46):
relatively strong throughoutthis year and last year, in the
face of all of these fed ratehikes, which was a historic run
of fed rate hikes that normallywould really tank the economy
pretty quickly.
But the money supply was soenlarged, so much it grew by 40%
during COVID, and all of theseloans were given out, all of

(05:09):
these COVID relief checks weregiven out, student loans were
deferred, money was very easy tocome by and then people's wages
were increasing.
So the economy was reallyresilient to all these fed rate
hikes and so, especially thisyear, even though the fed funds
rate was increased significantlymortgage rates were over 7%

(05:32):
borrowing costs even on creditcards and auto loans, and
everything was really high theeconomy has continued to stay
strong for the first threequarters of this year.
So strong economy and growth isinflationary, and so that was
one area that was keeping ratesfrom coming down.
Hedge fund managers were placingbets that they believed that

(05:52):
bond rates would continue tomove higher, so they had short
positions for bonds to movehigher.
So, as Wall Street places moreof those bets, that puts
pressure on rates for bonds tomove higher and mortgage rates
mortgages are bonds, so thatdirectly impacts mortgage rates.
You had the fed continuing tohike rates this year their last

(06:13):
rate hike was in July and thenyou've got this humongous amount
of debt that the government iscontinuing to rack up.
So here we are, you know, acouple years removed from all of
the COVID policies, and we'rerunning record deficits, and so
the government is having toissue more and more debt to
finance the operations of thegovernment.
So all of that was putting alot of pressure on rates to stay

(06:37):
elevated and then actually evenincrease as we got further into
this year and so getting intothe fall, mortgage rates were
into the low eights at the endof October, and so that was
really surprising for everyone.
But what happened around the endof October was a couple of
things.
We had a couple months where wewere getting less than stellar

(06:59):
economic data, and so the datawas starting to come out showing
that the economy is reallyslowing down.
Inflation is continuing to comedown.
We had the outbreak of theIsraeli Hamas conflict, which
anytime you have a majorgeopolitical event like that,
that's a destabilizing event.
It creates a lot of uncertainty, and uncertainty is good for
bonds.

(07:19):
Investors want to put theirmoney into safe haven trades,
which are bonds, and so bondsgenerally benefit during periods
of uncertainty, which wouldbring mortgage rates down.
So we normally see mortgagerates go down in a bad economy,
so that moved investors intobonds.
Those head a lot of those hedgefund managers who've been
placing short positions on the10 year treasury market and

(07:42):
other treasury notes have saidthat they thought 5% on the 10
year treasury note was going tobe the peak for this cycle, and
so it hit 5.01% right around thebeginning of November and then
it backed up from there.
It actually at that time whenit hit 5.01, that was a peak and
then that was the beginning ofa huge landslide of decreasing

(08:04):
rates.
So we've had that.
We've got now more data comingout showing that Q4, it looks
like it'll be really slow forthe US economy.
Jobs numbers are weakeningsignificantly and the Fed
appears to have finished theirrate hike cycle, so their last

(08:24):
rate hike was in July.
The expectation is that they'renot going to hike again.
They have their next meetingDecember 12th and 13th here this
month in two weeks and there'salmost zero chance that the hike
rates at that meeting, and theexpectation is that we'll see
four Fed rate cuts in 2024.
So that's a big change in policyfrom the Fed in the second half

(08:47):
of this year, and so, betweenthat, inflation numbers that are
continuing to come down, we'reseeing a significant improvement
in mortgage rates, and that runis continuing Like November was
the best improvement formortgage rates in a single month
in 40 years.
We're already this is the firstday of December.

(09:10):
Rates are improving again today, so there's a lot of steam
behind this improvement inmortgage rates.
And so here's another thingthat happens with all of this
when mortgage rates are rising,lenders will tend to price very
conservatively, because if ratesare rising at a rapid pace and
they're closing loans that areat lower rates than what current

(09:31):
market rates are, that's lessprofitable for lenders and so
they want to priceconservatively to make sure that
they don't get caught in aposition with rates that are too
low.
But then the opposite canhappen when rates start to come
down.
So as rates start to come downand there's a strong trend in
place, which we've got right now, that allows lenders to price

(09:53):
more aggressively becausethere's not as much risk for
rates turning around and movinghigher really quickly in a 30
day period.
So not only has the marketimproved significantly, but
lenders are in a position wherethey can price more aggressively
as well.
So we've got all of thatworking together and I think
that this time around it took along time for the Fed rate hikes

(10:15):
to really sink their teeth intothe economy.
Normally we would see a fasterreaction from the economy to
significantly increased rates,like we've had over the last
couple of years.
But what's different about thistime was the money supply
increasing by 40% during COVID.
That was a historic increase inmoney, and so most consumers

(10:36):
were in a position to weathersome slower economic times, and
those slower economic times comewhen the Fed hikes rates.
So it's just taken a lot longerfor these Fed rate hikes to
sink their teeth into theeconomy and grab hold so our
rates going back down to 3%?
I don't think so, barring anyunforeseen event, which is

(10:58):
always a possibility.
Anytime Rates go down really low, it's always something
unexpected.
That's what brings rates waydown.
You know, when we saw rates sub3%, that was due to COVID,
which was a shock to the world.
Nobody expected it.
It came out of left field andthen governments were reacting

(11:18):
and it causes panic.
So those are the types ofevents that give us significant
relief and rates.
You can't predict when thoseare going to happen.
But I do think that we're goingto continue to see improvement
in mortgage rates, especially ifthe Fed cuts rates 4 times in
2024.
Even though Fed rate hikes andcuts don't directly impact
mortgage rates, when all otherrates in the economy are coming

(11:41):
down, then mortgage rates willtend to come down along with it.
So there is a indirectinfluence with what the Fed does
and what we see with mortgagerates.
So this is a great time to bein the mortgage business, to get
into the mortgage business orto retool your business, because
I think we're going to see anincrease in business in 2024.

(12:01):
Probably a significant increasein business.
And it's a great time to look atbuying a home, because I can
tell you, if mortgage ratescontinue to come down in a
significant way, the market isthe home buying market is going
to be a lot more competitive.
Mortgage rates drive demand forhome purchases and so the real

(12:21):
estate market will slow downwhen rates go up because there's
not as many home buyers, andthen it will heat up when rates
go down because it incentivizesmore buyers to come into the
marketplace Because they can getthe same $500,000 home for $500
a month less.
So you want to get ahead ofthat as a buyer, and the reason
is when you buy if you buy nowand you get a 7% rate and then

(12:43):
rates go down to 5.5 throughoutthe year in 2024, you can just
refinance the mortgage and get a5.5% rate.
But you locked in the pricebefore the market took off.
So that's how you can hedgeyourself.
You can always refinance to alower rate when rates come down.
Dm me if you have any questions.
This is some interesting stuffthat we have going on in the
market right now.
Hope you have a great rest ofyour day.

(13:04):
Hey guys, thanks for listening.
I hope you enjoyed the show andgot some valuable information
out of it.
I want to help to educateothers and help people grow
their business and build wealth,and I can only do that with
referrals and your help gettingthe word out about this podcast.
So if you come across someoneyou think could benefit from
this, please share it with themand if there's somebody who
comes to mind, a five starreview go a long way in helping

(13:27):
me to grow this podcast and growthe brand.
So appreciate your support.