Good Monday Morning!
With expectations that the Fed may finally drop rates, would-be homebuyers are showing renewed interest. If rates do come down, don’t expect any sudden changes in the national housing market. A drop in the Fed’s benchmark rate may not immediately impact mortgage rates, as most lenders have already adjusted their rates in anticipation of a possible September cut.
What could have a greater effect are additional rate drops through the end of the year. This may present a golden opportunity for buyers, as home prices are currently soft and housing inventory has increased. Buyers today—and likely for the next several months—have the chance to negotiate more favorable purchase prices than may be available after the start of the new year.
If timed correctly, a buyer could secure a home at an attractive price while also benefiting from lower mortgage interest rates. However, this window of opportunity may not last long. As rates begin to decline further, demand will likely rise again, pushing the housing market back into a competitive environment.
The following article from Inman News explores the current potential for mortgage rate declines in more detail.
With 7.24 million Americans out of work in July and payroll growth slowing, the Fed is expected to pivot from fighting inflation to preserving jobs.
Upward pressure on mortgage rates didn’t stop homebuyers from shopping for bargains last week — and now rates are coming back down, according to lender application and loan lock data.
The Mortgage Bankers Association’s latest Weekly Mortgage Applications Survey showed requests for purchase loans were up by a seasonally adjusted 2 percent last week when compared to the week before, and up 25 percent from a year ago.
“Purchase applications had their strongest week in over a month, and the average loan size increased to its highest level in two months at $433,400,” MBA Deputy Chief Economist Joel Kan said, in a statement.
“Prospective buyers appear to be less sensitive to rates at these levels and are more active, bolstered by more inventory and cooling home-price growth in many parts of the country.”
Loan lock data tracked by Optimal Blue show rates on 30-year fixed-rate mortgages climbed to 6.63 percent last week before reversing course on Friday, after Federal Reserve Chair Jerome Powell said Fed policymakers are starting to see unemployment as a bigger risk to the U.S. economy than inflation.
That spurred investor demand for U.S. Treasurys and mortgage-backed securities that fund most home loans, pushing rates down.
Futures markets tracked by the CME FedWatch Tool showed investors on Wednesday pricing in an 89 percent chance of a Sept. 17 Fed rate cut, up from 65 percent on July 25.
Investors put the odds of three rate cuts totaling three-fourths of a percentage point by the end of the year at 40 percent, up from 20 percent a month ago.
Although the MBA’s Weekly Applications Survey showed requests to refinance were down 4 percent week over week, refi demand was up 19 percent from a year ago.
Forecasters at Pantheon Macroeconomics predict that the unemployment rate will rise to 4.6 percent by the end of the year, and that the Fed will cut short-term interest rates by a full percentage point by the end of March.
But Pantheon forecasts that yields on 10-year Treasury notes, a barometer for mortgage rates, will only come down by about half that much (48 basis points) over the same period.
Details from the Conference Board’s latest survey of consumer sentiment and other indicators suggest employers probably added 75,000 jobs in August, “with all of that growth coming from the private sector,” Pantheon forecasters said in their latest U.S. Economic Monitor.
The Mortgage Bankers Association’s latest Weekly Mortgage Applications Survey showed requests for purchase loans were up by a seasonally adjusted 2 percent last week when compared to the week before, and up 25 percent from a year ago.
Have a great Labor Day and an awesome week!
Stay Healthy! Stay Safe! Remain Positive! Trust In God!
Sincerely,
Galand
galand@galandhaas.com
541.349.2620