What will happen to home prices if mortgage rates fall?

While the Federal Reserve wants to see inflation heading toward 2.0%, December 2023 brought an increase of 0.3%, moving the Consumer Price Index (CPI) up to 3.4%.

Still, many expect the federal funds rate to stay at 5.33% this month and decrease later this year. But what will that mean for the housing market overall - and prices, in general? If mortgage rates decrease in 2024, expert predictions on what will happen to home prices varies. Below, we'll detail a few potential scenarios.

If you're in the market to buy a home then start by exploring your mortgage rate options here now.

What will happen to home prices if mortgage rates fall?

We asked a few experts for their predictions on home prices if mortgage interest rates continue to decrease this year. Here's what they said:

Higher affordability will attract buyers 

When mortgage rates begin to drop, buying a home typically becomes more affordable. "Should rate cuts occur in 2024, homebuyers may qualify for larger loan amounts or find that their monthly payments are more manageable," says Neil Christiansen, branch manager and certified mortgage advisor with Churchill Mortgage. 

With increased affordability, however, comes increased demand. "As interest rates inevitably decline (it's a matter of when not if), we can expect demand to surge. The initial drop in interest rates will entice first-time buyers and those without low mortgage rates to reenter the market, creating an increase in demand before a corresponding increase in supply," says Jared Antin, managing director and licensed associate real estate broker at Elegran. 

And some say that a demand increase has already begun due to a recent drop in mortgage rates. "Open houses hosted by Realtors were relatively mundane during the last quarter of 2023; however, they are back to being full and frequently visited," says Christopher M. Naghibi, Esq., executive vice president and chief operating officer at First Foundation Bank. "The slight dip in mortgage rates has made the worst housing market for affordability since the early 1980s slightly less unaffordable."

If you want to act before the competition among buyers increases then it helps to know your options. See what mortgage rate you could qualify for here now.

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