I’m sure you’ve probably heard the news: “Mortgage Rates Plunge,” “U.S. Mortgage Rates Drop Sharply,” “Mortgage Rates Drop.” With the way those headlines read, you would think we’re finally getting back to those 3% rates we’ve gotten so used to!
How big is this “plunge”? How sharp is “sharply”? And most importantly: where are interest rates going in the next few years?
THE GOOD NEWS: Average mortgage rates dropped to around 6.5% last week! Compared with the high of 7.8% we reached last year, that is terrific!
THE QUESTIONABLE NEWS: Rates have already been drifting back up to around 6.8% this week, so that drop may be short-lived.
THE BETTER NEWS: It seems like inflation has finally chilled a bit, so it looks like that the Fed will start dropping their rate next month. I think mortgage rates will drop another 0.25 - 0.5% by end of the year.
THE DISAPPOINTING NEWS: Going down isn’t going to be as fast as going up was. I don’t have a crystal ball to show the future, but I do have history books to show the past patterns.
The graph above illustrates how unusual the jump was in 2022-2023, and how long it will take for normal rate shifts to bring us back down to where we were. A 1% decrease usually takes at least 2 years, and often longer.
Honestly, my graph may be too optimistic. We only went as low as we did in 2012 because the entire national housing market had just crashed. Historically, 6% has been a very balanced rate.
THE BOTTOM LINE: Mortgage rates are improving, but don’t expect a fast drop. It will take several years before we are solidly in the 5’s again, if we get there.
Let me know whatever I can do to help you, neighbor!
I’m running another open house today at 3424 Teton Ct. Come swing by and see me if you can!