Will Rates Continue To Drop?
Time to take a breath. After what seemed like a whirlwind last month in markets, this week has been relatively calm. This calmness has brought some good news for homebuyers. Data released by Freddie Mac showed the average 30-year mortgage rates dropped by about 0.18% from last week.
What’s next? All eyes are set on the FOMC meeting next week. While a 25 bps hike (+0.25%) is all but baked in by markets, most participants will be tuned in to what the future guidance is on further hikes. As we've mentioned before, there has been a notable divergence between the views of the FOMC and the markets. FOMC members have consistently projected more than one additional rate hike by the year-end, whereas the markets have only priced in one.
The Fed's unwavering message is to bring inflation back down to its target of 2%. Powell's commitment in June to do "whatever it takes'' reflects this determination. However, with each rate hike, the strain on the economy grows, increasing the risk of a potential recession. With the following meeting not until September, this debate is sure to go through some twists and turns before all is said and done.
Homebuyers Should Remain Persistent
Data trends from the first half of the year suggest that those who are eager to buy, but are trying to wait out the market for a sharp decline in home prices and mortgage rates may miss out. The same goes for frustrated house hunters who are thinking of giving up their search.
According to the National Association of Realtors, the median existing home-price rose for the sixth-straight month in June to $410,200. Even though costs are on the rise, the NAR data showed 33% of homes on the market had multiple offers. As inventory remains limited, this trend is expected to continue.
Some experts expect relief with mortgage rates, but not a significant downward shift. Chief economist at Bright MLS, Lisa Sturtevant, “It’s not likely we’ll see rates below 6% before the end of 2023,” she continued, “but rates should come down from where they have been this summer.”
