Can Mortgage Rates Still Fall to 6%?

The housing market depends on it

Yesterday on the tennis court I smacked a searing forehand down the line. I was midway through a celebratory fist-pump when the ball came back to my side of the court: a great lesson in premature celebration that I have yet to learn.

But I’m glad I didn’t take a bow earlier this year when mortgage rates nosedived. Last October, I had forecast the 30-year mortgage rate, then at 8%, would fall to 6% before the end of 2024¹ . By February, with rates hurtling towards my target, way ahead of schedule, the urge to fist-pump was almost irresistible.

Good thing I didn’t. Mortgage rates went on to selloff by half a percent, before settling where they are now: 6.75%. They’ve moved substantially towards my target, but not all the way.

My forecast was an end-of-2024 call. There is still plenty of time. But my view was based partly on an expectation of lower inflation and weaker growth. Neither has fully materialized. In fact, during yesterday’s FOMC press conference, Chairman Powell was aggressively questioned about how the Fed can continue to cut rates against this strong growth/high inflation backdrop.

Maybe it’s time for a reassessment of my 6% mortgage rate call.

In this note for paying subscribers (a 5-minute read) I answer the following questions:

• In plain English, what drives mortgage rates?

• Could rates drop further—is 6% still a reasonable end-of-year target?

• What news and events should we be looking out for?

If having an informed view on the path for mortgage rates is part of your business (or you’re personally invested), I hope you consider subscribing. Subscribers get access to the full Home Economics archive, our buy-or-rent calculator, and free, one-on-one Q&A sessions with me.