Last week, mortgage rates took a surprising dip, marking the first decrease in over a month. The 30-year fixed mortgage rate fell to 7.09%, sparking speculation and concern among financial institutions and housing experts.
The recent rate volatility, with rates reaching as high as 7.22% just a week prior, has led to a shift in mortgage outlook for the remainder of 2024. Sam Khater, chief economist at Freddie Mac, highlighted the impact of elevated rates on both sellers and buyers. Many potential sellers are hesitant to list their homes in the current high-rate environment, leading to a decrease in supply and keeping house prices at elevated levels.
Fannie Mae, a government-backed mortgage institution, revised its year-end prediction for mortgage rates to 6.4% from 5.9% earlier in the year. Chief economist Douglas Duncan mentioned a forecast that includes the Federal Reserve cutting interest rates by 25 basis points twice in the fall to reach this target.
Despite the Federal Reserve holding the federal funds rate steady last week, mortgage rates have continued to climb, surpassing 7% over the past few weeks. Lawrence Yun, chief economist at the National Association of Realtors (NAR), expressed surprise at the lack of rate cuts by the Federal Reserve, pushing back expectations for lower rates to 2025.
With the core personal consumption expenditure (PCE) needing to drop towards 2% for three consecutive months to meet the modified forecast, housing experts are closely monitoring economic data and inflation trends. The NAR now anticipates average rates to settle at 6.5% by the end of the year, reflecting the uncertainty and fluctuations in the current mortgage market.