The scarcity of homes going up for sale has led to a housing inventory shortage.(Left) Kevin Dietsch/Getty Images, (Right) Getty Images
High mortgage rates are making it challenging for potential homebuyers to break into the market. A potential decline in mortgage rates may occur if the Federal Reserve cuts interest rates next year. Here are 10 forecasts from experts regarding the timing of the Fed’s first interest rate cut.
The high mortgage rates have essentially put the US housing market on hold. However, with the possibility of lower rates in the future, Americans may have to exercise some patience. The average 30-year fixed-rate mortgage, which was about 3% at the start of 2022, is currently over 7%. This has deterred potential first-time homebuyers and made existing homeowners hesitant to sell and upgrade due to the super-low rates they already secured.
Furthermore, the lack of homeowners selling their properties has led to a limited housing inventory, thereby sustaining the rise in prices, which may not change in the near future. Although these factors are discouraging for buyers, current high interest rates are not expected to be the norm for long.
The Federal Reserve has raised interest rates to combat inflation, but many experts have predicted that it will be more cautious and may even cut rates over the next year due to a slowing inflation rate and the potential weakening of the US economy.
While declining interest rates will not directly lead to a reduction in mortgage rates, the two often move in the same direction. Therefore, potential homebuyers are urged to stay informed about when the Federal Reserve may make its first interest rate cut, even though rates are unlikely to return to those of previous years.
Business Insider has compiled 10 predictions from experts, listed in chronological order with those expecting the earliest rate cut listed first.
- February
- By March of next year
- Not before April
- May
- Between April and June
- The 2nd quarter of 2024
- Between May and the end of 2024
- The 2nd half of 2024
- The end of this year
In August, Preston Caldwell, a Morningstar senior US economist, predicted in a note that the Fed would start cutting interest rates in February.
Earlier this month, a UBS team led by economist Arend Kapteyn and strategist Bhanu Baweja expects rate cuts to begin in March.
In August, David Einhorn, the founder and president of the hedge fund Greenlight Capital, did not anticipate rate cuts until next year.
KPMG US’s chief economist, Diane Swonk, forecasted the first rate cut in May 2024 in light of August’s inflation report.
A Reuters poll of 97 economists indicated the consensus prediction that rate cuts would not happen until the second quarter of 2024.
Goldman Sachs’ chief US economist, David Mericle, projected the first rate cut to be in the second quarter of 2024.
Economists from some of North America’s biggest banks anticipated rate cuts to occur between May and the end of 2024.
Vanguard’s global economics and markets team did not expect rate cuts to begin until the second half of 2024.
Jeff Morton, a portfolio manager at DWS Group, stated that rate cuts were unlikely to occur until next year.
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