Report predicts better times ahead
Slowing inflation in the US is expected to help make housing more affordable in the next two years, with borrowing rates including mortgages set to drop as a result.
That’s according to the World Bank’s Global Economic Prospect 2024, which suggested a “moderate” global inflation rate in the coming years (2025-26) will help contribute to a dip in interest and mortgage rates, likely paving the way for a more robust housing market.
A drop would come as a welcome development, with the US housing sector having felt the impact of skyrocketing interest rates as part of the Fed’s efforts to bring inflation under control. The Fed’s key rate currently sits at its highest level for over 23 years, between 5.25% and 5.5%, thanks to a series of aggressive hikes throughout 2022 and 2023.
That’s contributed to a protracted housing market slowdown as borrowers step to the sidelines thanks to much-publicized affordability woes.
The report indicated the US economy is likely to perform better throughout 2024 than the World Bank had earlier predicted, with expansion of 2.5% anticipated – a marginal increase of 0.09% over its initial forecast of 1.6%.
Growth is expected to slow to 1.8% next year thanks to a “trickle down” effect of high interest rates, preventing consumers from spending more – specifically on durable goods and residential investments.
"Broader consumer spending is expected to slow due to moderating growth in household income as labor market tightness recedes and savings diminish,” the report explained.
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