Mortgage rates fell for the eighth consecutive week, giving cash-strapped home buyers some relief as the new year approaches.

The average interest rate on the popular 30-year fixed mortgage clocked in at 6.67% for the week ended Dec. 20, down from 6.95% a week earlier, according to data released Thursday by mortgage giant Freddie Mac. As recently as late October, rates were 7.79% — the highest in more than two decades.

The drop in borrowing cost saves new buyers hundreds of dollars each month, but experts said consumers shouldn’t expect drastic improvement in 2024.

The interest rate on mortgages changes based on a variety of factors, including inflation expectations and Federal Reserve policy.

Keith Gumbinger, vice president of research firm, predicted rates will bottom out around 6.4% in 2024 as economic growth and inflation remain elevated enough to prevent further declines in borrowing costs.

“Cheaper mortgage money doesn’t necessarily mean that cheap mortgage money is coming,” Gumbinger said. “If you really want the lowest possible interest rates, you really have to hope for the most horrific economic climate.”

Rates have fallen since October, however, in large part because multiple economic reports have signaled inflation is slowing.

The most recent decline comes after the Federal Reserve signaled last week it may be done raising its benchmark interest rate, which helps set a floor on all types of borrowing costs, including mortgage rates.

For prospective homeowners, housing remains drastically more expensive than when rates were 3% and below during the early part of the pandemic. But the decline from 7.79% to 6.67%, equals $486 in monthly savings for a $800,000 home, assuming a buyer puts 20% down.

What effect somewhat lower mortgage rates will have on the housing market depends on how buyers and sellers react.

When mortgage rates first surged in 2022, home prices fell in response as buyers quickly pulled away and inventory swelled. But prices started rising again this year as well-healed first time buyers returned and existing homeowners increasingly chose not to sell, unwilling to give up their rock-bottom mortgage rates on loans taken out before or during the pandemic.

In most counties, home prices are near their all-time peaks, while in Orange County, prices are setting new records, according to data from Zillow.

Jordan Levine, chief economist with the California Assn. of Realtors, said rates likely will end 2024 in the “low-6% range,” which should convince more existing homeowners to sell.

But he said the increase in supply isn’t likely to be enough to offset an increase in buyers who will also be lured by lower borrowing costs. As a result, Levine said the market may actually be more competitive in 2024, with prices up around 8% by year’s end in Southern California.

A recent forecast from Zillow predicted values would be flat to down slightly in Southern California between November 2023 and November 2024.

Zillow senior economist Nicole Bachaud said falling rates could mean home price growth comes in stronger than that forecast, but maybe not.

“Given the affordability crisis in Los Angeles, we might see sellers move before buyers have enough room in their budgets to respond,” she said.

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