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Mortgage rates poised to drop to 5.5% in 2024: Bloomberg

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Most economists forecast mortgage rates to decline in 2024, stoking optimism about the housing market.

According to the newest Bloomberg Markets Live Pulse Survey (MLIV Pulse), the rate on the 30-year fixed mortgage will fall to 5.5% by the end of this year. Most forecasts call for rates to bounce within the 6% to 7% range in 2024, marking the first annualized decline after three straight years of gains.

In 2023, elevated mortgage rates froze sales of existing homes, which slid to their lowest pace since 1995. In 2023, only 4.09 million existing homes were sold, according to the National Association of Realtors. High borrowing costs simultaneously pushed rate-sensitive buyers to the sidelines while handcuffing current homeowners to their historically low mortgage rates. High rates further exacerbated the national inventory shortage and contributed to the surge in home prices

Federal Reserve officials anticipate at least three rate cuts in 2024, according to projections from their December meeting. The Federal Open Market Committee (FOMC) meets again on Tuesday and Wednesday. 

On Monday, meanwhile, 97.9% of investors were anticipating the benchmark interest rate to remain the same after the FOMC meeting, according to the CME Group’s FedWatch tool. But 48.6% of investors have priced in a cut of at least a quarter point in March. On the bright side, new listings rose 2.2% compared with a year earlier, according to Redfin data for the four weeks ending Jan. 21. 

“The worst is over for the housing market, but a full recovery will be slow in coming,” Mark Zandi, chief economist at Moody’s Analytics, told Bloomberg. “Mortgage rates should continue to trend lower this year.”

With the U.S. economy looking more encouraging in 2024, 57% of the respondents to the Bloomberg MLIV Pulse survey perceive real estate as a more attractive investment than it was last year. About 10% of the respondents think that a decline to a 6% rate for a 30-year fixed mortgage could help grow single-family housing inventory, while 39% feel that a 5% rate would be preferred. 

The MLIV Pulse survey is conducted weekly among Bloomberg terminal and online readers. Last week, the survey focused on U.S.  consumers and included 236 respondents. 

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