10/18/2024
Housing, Rates, and What Is Ahead
What a run. Home borrowing costs fell over a point from early May to the end of September in anticipation of the Federal Reserve beginning its interest rate-cutting cycle. The benchmark 30-year fixed-rate mortgage went from 7.25% on the 2nd of May to just above the recent 6% level. That is a solid decline in the cost of monthly mortgage payments in a short period.
But the question is always, "What have you done for me lately, and where do we go from here?" Let's start with lately. Treasury prices rallied in the five months through mid-September, the longest winning streak in 14 years due to the Fed and as inflation continued to cool. The markets witnessed a clear buy on the rumor and sell on the news (Fed rate cut on September 18) reaction. Since the Fed announcement, mortgage bond prices and Treasury prices have declined while yields have pushed higher... sell on the news. After the decline in home borrowing costs, rates have held steady.
Where we go from here is a bit trickier. Looking ahead, home borrowing costs will take direction from indicators such as inflation, economic and jobs data, and current geopolitical headlines. If the economy shows signs of cooling, central banks might lower rates to stimulate growth, which could reduce borrowing costs. Conversely, if inflation pressures reignite, rates could rise. Most pundits see the 30-year fixed at 6% by year's end and dropping to 5.5% by mid-2025.
Freddie Mac says mortgage rates have declined, home price growth is slowing, inventory is increasing, and incomes continue to rise. As a result, the backdrop for homebuyers this fall is improving and should continue through the rest of the year.
Bottom line: The quest for homeownership can be a notable journey, filled with hurdles and rewards. It often begins with a yearning for stability, independence, and the investment potential that owning a home can offer.
Source: Mortgage Market Guide
