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Although there was an initial surge in purchase loan applications as rates began to decline, this trend has recently waned. Freddie Mac’s Chief Economist, Sam Khater, emphasized that for a more consistent revival in housing demand, rates would need to fall further. Current declines, though welcomed, are not sufficient to significantly stimulate demand in the housing market.
Market Overview:
-Mortgage rates have fallen for six consecutive weeks.
-The average rate for a 30-year, fixed-rate loan is now 7.03%.
-This is the lowest level since August 2023.
-The housing market remains tough, with limited inventory and high prices.
-Purchase loan applications initially rebounded with the rate drop, but momentum has slowed.
Key Points:
-Lower mortgage rates offer hope for homebuyers, but affordability remains a concern.
-Further declines in rates are likely needed to stimulate demand significantly.
-The Federal Reserve may pause its rate-hike campaign next week.
-Continued improvement in inflation could lead to further rate reductions in 2024.
Looking Ahead:
-The Federal Reserve’s decision on interest rates next week will be closely watched.
-The release of the government’s monthly employment report on Friday could provide clues about the economy’s health.
-Continued progress on inflation could help bring down mortgage rates further.
-The housing market is likely to remain volatile in the near term.
Looking ahead, Realtor.com economist Jiayi Xu forecasts a continuing improvement in inflation, leading to a further reduction in mortgage rates, potentially reaching around 6.5% by the end of 2024. This projection, if realized, could provide a substantial boost to the housing market, enhancing affordability and reigniting demand among prospective homebuyers.
This article was originally published on Quiver Quantitative
