Will California Mortgage Rates Go Down in 2024?

Another week, another increase in California mortgage rates. That’s the gist of a new report from Freddie Mac that was published earlier today. And that has a lot of people wondering if mortgage rates in California will drop in 2024.

Mortgage Have Risen in 2023

Freddie Mac is one of the two government-sponsored enterprises, or GSEs, that purchase mortgage loans from lenders. (Fannie Mae is the other.) Freddie Mac also conducts a long-running survey of the mortgage industry to compile an average for interest rates.

Today, Freddie Mac reported that the average rate for a 30-year fixed mortgage loan rose to 7.49%. That’s the highest it has been in 23 years. To put this into perspective, 30-year mortgage rates were averaging around 3% two years ago. So they have more than doubled since fall 2021.

According to the October 5th report from Freddie Mac:

“Mortgage rates maintained their upward trajectory as the 10-year Treasury yield, a key benchmark, climbed. Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation.”

Will They Go Down in 2024?

All of these trends have a lot of home buyers wondering the same thing. What’s the outlook for the rest of this year and into next? Will California mortgage rates go down in 2024? Will they continue to hover in their current range or push even higher in the months ahead?

The short answer is, we don’t know. Mortgage rate trends can be influenced by a number of overlapping factors. That makes it nearly impossible to predict future trends with total accuracy.

But you might be happy to know that a couple of industry groups expect mortgage rates in California and nationwide to drop a bit in 2024. And that would be a positive development from a future home buyer’s perspective.

Back in September, the California Association of Realtors (C.A.R.) published a housing market forecast for 2024. The industry group said it expects to see an increase in both home sales and prices next year.

You might wonder how they could forecast an increase in home sales, given the higher borrowing costs mentioned above. That’s because they expect rates to drop over the coming months.

A decline in mortgage rates would create a more buyer-friendly real estate market, which in turn could lead to an increase in home sales activity across California.

According to C.A.R. president Jennifer Branchini:

2024 will be a better year for the California housing market for both buyers and sellers as mortgage interest rates are expected to decline next year. A more favorable market environment with lower borrowing costs, coupled with an increase in available homes for sale, will motivate buyers and sellers to reenter the market next year.

C.A.R. is not alone in their prediction for declining mortgage rates. The Mortgage Bankers Association also expects to see lower interest rates next year, compared to where we are now.

They predicted that the average rate for a 30-year fixed home loan would drop to 6.3% during the fourth quarter of this year. Looking even further out, they expect rates to drop down into the upper 5% range by the middle of 2024.

But again, these are predictions and not certainties. They are the equivalent of an educated guess based on current market trends and economic conditions. And those conditions could change significantly as we finish out this year and enter 2024.

Strategies and Advice for California Home Buyers

Mortgage rates don’t exist in a vacuum. They can be influenced by a wide range of factors, including some things that you have control over. If higher interest rates are deterring you from buying a home in California, consider the following strategies:

Improve your credit score. A higher credit score can help you qualify for a lower interest rate, which in turn could save you a significant amount of money over time. Start by reviewing your credit report and addressing any inaccuracies. Pay your bills promptly going forward, to maintain or even improve your credit score.

Put more money down. A larger down payment reduces the amount you need to borrow, potentially lowering your interest rate as well. Consider cutting non-essential expenses and diverting those funds into your down payment savings.

Explore your mortgage options. Research various types of mortgages, including both fixed and adjustable-rate mortgages (ARMs). ARM loans often have lower interest rates during the first few years of homeownership. Evaluate the pros and cons of each option to find the best fit for your financial situation.

Consider a longer term. If you’re more concerned with the size of your monthly payments, rather than the amount of interest paid over time, consider using a 30-year fixed mortgage. The longer term can reduce monthly payments and make homeownership more attainable.

Lock in your rate. If you find a favorable mortgage rate, consider locking it in to protect against potential future rate hikes. This is especially important in times when mortgage rates are on the rise, as they have been in 2023.

Budget wisely. Create a comprehensive budget that includes all homeownership costs, such as property taxes, insurance, and maintenance. Ensure that you can comfortably afford your monthly mortgage payments without straining your finances.

Be patient and informed. Monitor the housing market and interest rates closely. Don’t rush into a decision; take your time to make a well-informed choice.