Morgan Stanley analysts recently delivered a report to investors with their views on the U.S. economy, housing market, mortgage rates, and bond market in 2024.

The three factors that improve housing affordability are falling mortgage rates, rising incomes, or falling house prices. Predicted in their report for 2024, Morgan Stanley analysts believe the following:

  • the U.S. economy will avoid a recession
  • incomes will continue to rise
  • mortgage rates will decrease slightly*
  • U.S. housing activity will pick up a little

*Morgan Stanley did not provide a concrete mortgage rate forecast for 2024. They report mentioned anticipating the 10-year Treasury yield to conclude 2024 at 3.95%. Based on today’s spread (296 bps) between the 10-year Treasury yield and the 30-year fixed mortgage, that would result in a 6.91% mortgage rate by the end of 2024. If the spread narrowed, it’d be even lower.

How can Morgan Stanley predict that both U.S. home prices and mortgage rates will drop in 2024?

Here’s what Morgan Stanley analysts had to say: “The immediate response in the [housing] market [to spiked mortgage rates] has been renewed decreases in inventory, which we think provide near-term support for home prices. As rates come down throughout the year, we would expect affordability to improve and for-sale inventory to increase. Both of these developments are constructive for housing activity, but the latter provides a potential counterbalance for home prices. We expect housing activity to be stronger in the 2nd half of the year and new home sales to increase more than existing home sales over the course of the full year…”

2024 Mortgage Rate Forecasts

Take a look at the quarterly mortgage rate forecast for 2024 by Fannie Mae, Mortgage Bankers Association, and Goldman Sachs:

As 2024 approaches, reach out to us at Hawaii VA Loans for all your VA home loan financing needs. We will be there for you every step of the way as we watch the mortgage forecast and housing market in the new year. Contact us at 808-792-4251 or fill out our online loan application.