Fed commentary finally aligned with steadily declining inflation indicators and growing unemployment figures sending 30-year fixed mortgage rates plummeting .375% in just over a week.
While critics argue over the timing of a short-term Fed Funds rate cut, its imminence has rallied home buyers and opened the door to ditching rates north of 7%.
Mortgage rates are now down a full 1% since April with hints of a recession pressuring a sustained downward trend. This recap will arm you with decision-making tools if you’re home shopping and current data and forecasts if you’re looking to stay informed.
Mortgage Rate Insights
Mortgage rates move on anticipation of what financial markets will do with hikes and drops up to .25% inside of a week from simple Fed committee commentary. The July 31st meeting recap with foreshadowing of rate cuts in September sparked the momentum we’ve been waiting for.
How Far and How Fast
This is the crystal ball moment. September promises a .25% to .50% cut in the short-term Federal Funds rate now partially baked into current mortgage rates. Analysts predict a gentle decline in longer term mortgage rates with “periods of correction” re-emphasizing the volatility of current markets. How far and how fast is the wait and see, but DOWN has launched.
Below is a summary of 30-year fixed mortgage rates since August of last year. Not quite what December forecasts led us to believe would be our trajectory for the year but finally headed in the right direction with solid data supporting continued improvement and at last, what appears to be a sustainable downtrend.
Forecast Like a Pro
For my data diving readers who like to predict where rates are headed, with every 16-point change in mortgage-backed securities (MBS) we typically get some movement in rate. For reference, our recent .375% improvement in 30-year fixed rates stemmed from a 100-basis point improvement (increase in price) in MBS. The reverse also holds true. As mortgage-backed securities drop in price, mortgage rates go up.
Housing Inventory Shortfall
Higher rates have impacted builders just like buyers and new home starts stalled out in the first half of 2024 exacerbating the supply challenge.
Inventory levels remain tight with 3.7 months of supply at the current slow pace. Adequate available home inventory to retain price stability hovers around 6 months. Continued short supply fuels the growth in home prices nationwide despite a slowdown in buyer activity.
Single family housing starts rebounded nationally up 3% to an annualized rate of 1.314 million through June. Any action by the Fed, will directly impact commercial lending and likely rekindle builder activity. The chart below reflects housing starts since July of last year.
Home Prices
Nationally home prices are up 5.9% as compared to last year and no states posted annual home price declines. The Northeast leads the charge for appreciation with states like New Hampshire up 12% year over year. The West Coast has calmed with increases in the 1% to 5% range down from the pandemic spikes of over 20% in our region.
Home prices locally haven’t dropped since 2012 and while overall sales are down year over year, the median days on market to pending range from 9 to 13 according to Zillow and Redfin respectively.
Housing Market by State stats found here
Don’t Be Discouraged by Affordability Hype
Affordability is flagged as the primary inhibitor to more activity with interest rates and statistics on median and average home prices discouraging would be home shoppers.
Notably, the lower end of the price spectrum has been largely absent since March of 2022 when rates began their rapid ascent, evidenced by the nominal activity in sales data under $500K as seen in the chart below skewing those average and median prices upward.
Don’t let the data discourage your quest, especially if you are a first-time buyer deemed priced out. A dip in rates will change the buyer pool as more first-time, and early move-up buyers will be back in the game and the overall affordability picture as represented by these data points will improve.
Pent-Up Demand
The stage is set for competing offers when rates near 6% as pent-up demand collides with limited supply. My advice, don’t over fixate on rate and miss the price. Here is some simple math to help define a buy or wait strategy.
Assume a home value of $500,000 with 20% down
Using our recent rate drop as an example on a $400,000 loan amount, a rate change from 6.375% to 6.000% would save approximately $100 per month in payment or buy about $15,000 more in house.
Conversely, that home is appreciating at 5.6% annually as of today, or just over $2300 per month. That appreciation is your once you own it! Each month you wait actually costs you money.
Rolling the Dice
Getting caught up in rates is like rolling the dice. You could quickly lose that buying power gain that comes with a lower rate in a bidding war as demand drives home prices up. If a home purchase is on your radar, get ahead of the demand surge, get pre-approved and start shopping
If rates dip to 6% or under, forecasters anticipate a surge in activity, especially at the lower end of the market.
And About That Refinance?
I watch rates daily and have my pre-approved clients on a watch list. When we get that needed dip, we chat and lock you in. It’s that simple. If you’d like to be added to my Refi Ready list, connect here and let’s get you queued up for a lower rate.
Best Loans for 2024
Selecting the right loan can make or break affordability and ease the stress of a move. Below are some top picks so far this year. A great way to access some equity without losing that current low rate, Fairway now has new fixed rate 2nd mortgage programs with exceptional rates to add to line-up. Check-in with me for specifics.
1% Down First-time Buyer Loans – with only a 1% down payment, qualified first-time buyers now have easier access to that first home with a smaller upfront hurdle, the down payment. Reach out for details.
Buy Before You Sell – buyers who also have a home to sell can qualify for the new home before selling their existing home pre-approving them to make a non-contingent offer. Contingent offers are those where the sale of your current home is a contingency to purchase a new property.
Renovation Loans – perfect for the firs-time buyer or the move-up buyer looking to buy under market and create their own space. Renovation loans allow you to finance the renovations into your primary mortgage, no additional out pocket costs for improvements.
Investment Property Loans – qualify the borrower with anticipated cash flow from the property. Let property qualify itself!
Retirement Mortgages – looking to upsize or downsize, ideally eliminate your mortgage payment, AND have some cash reserves in a growing line of credit? It’s the hottest program we have for borrowers aged 62+ to help preserve financial resources, improve quality of life, and enable a move to the right home. 62+ Homebuyer’s Guide
Monthly mortgage payments reflect hypothetical principal and interest amounts rounded to the nearest dollar amount and include estimates for homeowners insurance, property taxes, and can be adjusted to include estimates for PMI (private mortgage insurance) and HOA (Homeowners Association) dues if/when applicable. These estimates do not account for all possible fees and costs which may apply. The figures and rates displayed herein are for educational purposes only and do not reflect an official mortgage loan offer or a commitment to lend. Any potential benefits from homeownership are based on individual factors. Contact your Fairway loan officer for more information regarding your specific situation.*By refinancing your existing loan, your total finance charges may be higher over the life of the loan.
