When it comes to mortgage rates, it helps to have multiple perspectives. If you’ve been a BAM reader long enough, you’ve read several different predictions from different housing experts on what we can expect over the next 1-2 years.
You also heard a prediction from a respected housing expert during BAM Pro Bowl.
And, last week, on the Knowledge Brokers Podcast, Logan Mohtashami, Lead Analyst for HousingWire, shared his own thoughts on mortgage rates.
Anyone hoping to buy a home in 2024 is likely hoping rates fall below 6% sooner rather than later. But given the relationship between the 30-year fixed and the 10-year Treasury Yield, later seems more realistic.
Read on to get a sense of how the conversation went. And be sure to watch the full podcast episode to hear the whole conversation.
HOW LIKELY IS THE 30-YEAR FIXED MORTGAGE RATE TO HIT 5% IN 2024?
Byron Lazine brought up the idea of mortgage rates falling to 5% in 2024—and specifically how this prediction could influence anyone wanting to buy or sell a home in the near future. He asked Mohtashami for his opinion on whether 5% mortgage rates were likely this year. After all, most projections call for 5% (high 5’s, at that) happening maybe in the fourth quarter.
Logan started by addressing the relationship between the 30-year fixed mortgage rate and the 10-year Treasury yield.
You have to follow kind of where you think the bond market is going because, I always say this, the 10-year yield and the 30-year mortgage rates, they have been slow-dancing. They are a love couple since 1971. So, where you actually think the 10-year yield will range is where the mortgage rates will range. And unless you’re a bond trader or someone that tracks the 10-year yield, you really shouldn’t listen to anybody on mortgage rates, unless they give you a forecast range.
When I started incorporating these in my forecast in the last decade, I try to give people ranges and then every single day, we go over what’s going on and what drives it. And it’s really Fed expectations, inflation expectations, the macro data. These things actually drive mortgage rates and the 10-year yield. Logan Mohtashami - Lead Analyst for HousingWire
When the 10-year reacts to a Fed announcement or anything that could motivate the Fed to raise interest rates or hold off on rate cuts, the 30-year fixed generally reacts in the same way.
SO, WHAT WILL IT TAKE TO GET TO 5% MORTGAGE RATES?
Following up on his point about the spread between the 10-year yield and 30-year mortgage rates, Mohtashami went on to spell out exactly how we can get to 5% mortgage rates.
Of course, the spreads are really bad right now. But if you had to ask me, ‘5% mortgage rates: how do you get there?’ Okay, the labor data gets weaker, the Fed has to pivot, and the spreads have to get better. And then, in that environment, the 10-year yield gets below 3.21, you’ve got 5% mortgage rates in that scenario.
So, when those things occur, then you can move into that direction—but none of that is happening right now…I’m not a Fed pivot person. I don’t believe the Fed has pivoted yet. So, the things aren’t in place. Logan Mohtashami - Lead Analyst for HousingWire
Byron has mentioned Mohtashami’s “Gandalf line” many times on Hot Sheet as well as on Knowledge Brokers. It’s called that in reference to Gandalf the Grey staring down the Balrog in Lord of the Rings and saying, “You shall not pass!”
The Gandalf line is where the 10-year Treasury yield reaches 4.25. We’ve been there—and beyond. And we’ve survived it. It’s not where we want to be, and a 4.25 yield clearly does not go hand-in-hand with mortgage rates in the 5% range.
But signaling that we’ll see 5% rates in 2024 could potentially lead to consumers putting their homebuying plans on hold until rates go down. Meanwhile, home prices continue to rise, thanks to low inventory.
