Mortgage rates ticked down modestly after job openings data for July came out yesterday, but rates remain elevated.
Freddie Mac‘s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 7.18% as of Aug. 31, down from last week’s 7.23%. By contrast, the 30-year fixed-rate mortgage was at 5.66% a year ago at this time.
“Despite continued high rates, low inventory is keeping house prices steady,” said Sam Khater, Freddie Mac’s chief economist. “Recent volatility makes it difficult to forecast where rates will go next, but we should have a better gauge in September as the Federal Reserve determines their next steps regarding interest rate hikes.”
Other indices showed lower mortgage rates.
HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 7.07% on Wednesday, compared to 7.22% the previous week. At Mortgage News Daily on Wednesday, the 30-year fixed rate for conventional loans was 7.06%, down from 7.36% the previous week.
What to expect with the Fed ?
At the last Federal Open Market Committee meeting, Federal Reserve Chair Jerome Powell emphasized the importance of July’s core Personal Consumption Expenditure (PCE) Price Index for the Fed’s future path. The results came in today and the PCE price index jumped slightly from year-ago levels but grew at a mild monthly rate, which is more in line with the Fed’s 2% inflation target.
Meanwhile, the labor market is cooling as U.S. job openings dropped in July. However, more robust data points will be required to confidently assert that inflation is moving in the desired direction, said Realtor.com Economist Jiayi Xu.
“Despite mortgage rates hitting 20-year highs, we still expect them to reverse course and trend lower as we gather more solid evidence of inflation improvements in the coming months,” added Xu.
What does it mean for the housing market ?
Incentivized by return-to-office demands, some buyers have adjusted to the higher mortgage rate environment and are moving forward with their home search, according to Realtor.com’s 2023 Hottest Zip Codes report. However, first-time homebuyers are facing greater challenges to make such adjustments.
“Fortunately, new homes remain an option for many, as builders are continuing to add homes with a somewhat greater focus on affordable price points,” said Xu.
What to expect for the fall ?
Last fall when mortgage rates surged, homebuyers adjusted pretty quickly, noted Bright MLS Chief Economist Lisa Sturtevant. First, they held back a little, only to come roaring back to the market in 2023. However, this time could be different, she said.
Rates above 7% are now coupled with home prices near record highs.
“The desire for homeownership is still strong, but there are going to be more and more prospective buyers for whom the numbers simply don’t pencil out anymore at 7%+ rates,” added Sturtevant.
That said, mortgage applications rose last week in spite of the rates being at a 22-year high. However, economists expect applications will decline significantly in the weeks ahead, bringing a shift in the housing market.
“As demand contracts, supply will still remain low, so the slower market will not necessarily translate into significant price declines,” said Sturtevant.
Source: housingwire.com