Breaking! Mortgage Interest Rates Have Fallen to Normal Levels!

Most of you are probably wondering what Jon has been smoking, but what if that were true? Just what would a normal interest rate be? Less than 3%? In the 3’s? How about in the 4’s? Well, let’s take a look.

Freddie Mac has tracked U.S. weekly average 30-year fixed rate mortgage rates since 1971 and here is a chart showing the rates over that period.

As you can see, the median rate over this entire period is 7.41% and for the first 25 years, the mortgage rates were mostly above that. I purchased my first home in 1980 with a mortgage rate in the 14’s%. The last couple years have really been an anomaly, but for many Americans, that is what the perception of normal became. Currently, as of January 18, 2024, the average 30-year fixed mortgage rate being reported by Freddie Mac is 6.6%, which is below the 50+ year median.

Here are the median interest rates by decade:

1970’s  8.89%

1980’s  12.82%

1990’s  7.88%

2000’s  6.18%

2010’s  4.03%

2020’s  3.62%

The Covid years brought on the perfect storm for real estate, an all-time record low 30-year mortgage rate of 2.65%, record low inventory, and record demand, which all converged to drive up prices. The two years from 2021 -2022 are known as the unicorn years and will probably have to be left off any statistical references because there was nothing normal about that time. Those numbers severely skew any attempts to create an average statistic.

This week, Fannie Mae reported: “We believe that moderating mortgage rates, a decelerating economy, and waning effects of the 2020-21 period’s pull-forward of home purchase activity will precipitate an unfreezing of the existing homes market, and therefore a movement toward a more balanced housing market…We anticipate that after the past several years of extreme volatility in interest rates, the 30-year fixed rate mortgage rate will continue to moderate over the course of 2024, moving toward a rate below 6 percent by year end.”

These predictions demonstrate stability and balance in the housing market in the coming year.

In response to a poll last week, my newsletter subscribers self-reported their mortgage interest rates – with 67% having mortgage rates at 3% and below! This is likely as a result of many buying or refinancing during the “unicorn years” of 2021 and 2022. Yet, as you can see from the statistics, this is not the norm!

So the bottom line is that the current rates are rather normal historically. No one can predict with accuracy where interest rates will be in the future, but many experts agree that they will probably stabilize at this current rate or slightly lower. Stability is a good thing in my opinion. The unicorn years were not sustainable. We will be just fine with rates around 6%.

Norwalk IA Real Estate – Jon Niemeyer, Broker/Owner/REALTOR® at EXIT Realty North Star. I list and sell real estate in Central Iowa including Norwalk, Des Moines, West Des Moines, Cumming, Indianola, Carlisle, Waukee, Urbandale, Grimes, Clive, Johnston, Ankeny, Altoona, and Pleasant Hill in the Counties of Warren, Polk, Dallas, and Madison. Call Jon Niemeyer at 515-490-4675.