We’re not likely to see rock-bottom rates like those of the early 2020’s again in our lifetimes–at least that’s the hope–because rates that low follow major catastrophe(s) (in this case the subprime mortgage crisis and Great Recession of 2007-2009, soon followed by the Covid pandemic of late 2019-early 2023). The average 30-year fixed rate dropped to a record low of 2.65% the first month of 2021 before spiraling upward to 8.0% in late 2023.  The Fed admittedly bungled rate management throughout the entire multi-event term. It should have begun escalation much sooner, and far more incrementally. The upside, however, is that for almost two decades, homebuyers who would not otherwise have qualified for a mortgage were able to purchase their first homes in our prohibitively high-priced real estate market.

Looking to the end of 2024 and the 2025 market, the ‘best case’ rate target is likely to be rates in the 5% range. Buyers should note, however, that even during the ‘down market’ of 2024, DC home prices have continued to rise. Once rates start to fall consistently, buyers will return to the market en masse, prices will rise in greater percentages. and bidding wars will return. Game out the breakeven and gain/loss of a purchase with a flexible higher mortgage interest rate against one with a cemented 6% to 12% (or higher) price increase.

If buyers can obtain a 2024/2025 mortgage with rates in the 6 percentile range, and refinance if rates later drop into the 5% range, that would be a win. The price paid for a home doesn’t change. while financing options can be changed throughout the ownership term.