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Last week, mortgage rates fell for the first time in over a month, with the 30-year fixed mortgage rate hitting 7.09%.
Rebecca Chen of Yahoo Finance reports:
Recent rate volatility – including this week’s 7.22% drop and last month’s steady rise – has led some financial institutions to modify their mortgage outlooks for the rest of 2024.
“An environment where rates remain above 7% impacts both sellers and buyers. Many potential sellers remain hesitant to list their homes and forgo lower mortgage rates from previous years, negatively impacting supply and keeping home prices high ” said Sam Khater, Chief Economist at Freddie Mac. “These high home prices add to the overall affordability challenges potential buyers face in this high-rate environment.”
Robust economic data and persistent inflation have led housing experts to change their forecast for where rates will fall by the end of 2024.
Fannie Mae, a government-backed mortgage lender, raised its year-end forecast to 6.4% from 5.9% earlier this year.
“Our … forecast includes the Fed cutting interest rates by 25 basis points twice in the fall,” Douglas Duncan, chief economist at Fannie Mae, told Yahoo Finance.
The Federal Reserve held the federal funds rate steady last week. Meanwhile, mortgage rates – influenced by the Fed’s benchmark index – have surpassed 7% over the past three weeks.
To get to or close to the modified forecast, Duncan said the key Personal Consumption Expenditures (PCE) index – the Fed’s preferred gauge for inflation – will need to fall to 2% for at least three consecutive months. The last PCE core obtained 2.8% in March year over year.
The National Association of Realtors (NAR) now expects average rates to settle at 6.5% until the end of the yearmodified from the 6.3% predicted at the beginning of the year.
“The Federal Reserve delayed rate cuts,” said Lawrence Yun, chief economist at NAR. “I would have thought by now rates would be lower and the rate cuts would have started. Any rate cuts the Federal Reserve doesn’t make this year will simply be delayed until 2025. They’re calling for a rate cut in September, but we’ll see.”