A Real Estate Market Perspective: Navigating Mortgage Rate Forecasts

May 30, 2023
8:00 am

As real estate agents, staying informed about the ever-changing landscape of mortgage rates is crucial. In a recent presentation, Sean Varin, President of Encompass Lending Group, shared valuable insights regarding the mortgage rate forecast. Here are the key points discussed and a better understanding of what lies ahead.

Federal Reserve Outlook

The Federal Reserve implemented a 25 basis point increase on May 3, 2023. Looking ahead, there will be two more meetings within 75 days. The expectation is a quarter-point increase after the first reading and another quarter-point increase after the second reading. However, there is a slight optimism that the Federal Reserve might pause on the second increase.

Inflation and Quantitative Tightening

The Federal Reserve’s primary concern is controlling inflation. To achieve this, they are closely monitoring the ongoing battle against inflation and working towards driving it down. Quantitative tightening and low liquidity in the mortgage-backed securities market impact mortgage rates, hovering at their present levels.

Political Factors and Future Trends

Politics also play a role in shaping the market’s trajectory. The upcoming 2024 year will be politically significant, influencing market dynamics. However, quantitative easing will likely occur in late 2023 and continue into 2024. When this happens, a downward trend in mortgage rates is anticipated. While it is unlikely that we will return to the historically low rates of the past, the expectation is for a more normalized market, with rates stabilizing in the mid-five percent range.

The Recession Scenario

The word “recession” can evoke concerns and uncertainties. However, historically, recessions have presented opportunities for mortgage and real estate industries. For example, mortgage rates have consistently decreased in the last six recessions. Furthermore, in seven out of nine recessionary periods spanning over 60 years, home values have actually increased. As a result, real estate has often played a crucial role in leading us out of economic downturns, contributing to the decline in interest rates.

The Future of Mortgage Rates

Based on the information shared by Mr. Varin, it is expected that quantitative easing will be formally announced in late 2023 or 2024, leading to a decline in mortgage rates. While we should not anticipate returning to the ultra-low rates of the past, this shift will create opportunities for both homebuyers and sellers. In addition, the current steps taken by the Federal Reserve suggest that we may have reached a bottom with interest rates, providing a glimpse of hope for the future.

Real estate professionals must remain well-informed about the forecast for mortgage rates. While the Federal Reserve has implemented a recent increase and more are expected, factors such as inflation, quantitative tightening, and political influences may influence the pace of rate hikes. However, the prospect of quantitative easing in late 2023 and beyond instills optimism for a gradual rate decline. Recessionary periods have historically proven to be opportunities for the mortgage and real estate sectors, and home values have generally increased during these times. Stay attuned to the developments in the market and leverage this knowledge to guide your homebuyers effectively.

Do you have the right team supporting YOU and your clients’ mortgage needs? Look no further than Encompass Lending Group. ELG’s goal is to make you the champion with on-time closings and world-class service, so your clients will refer you to their families and friends, taking your business to the next level.