Mortgage Rates Experience Second Decline in 2024
In a recent report, Freddie Mac revealed a decline in the average rate for a 30-year loan to 6.63%, down from 6.69% the previous week, potentially contributing to a rebound in the US housing market this spring. While experts predict a busier buying season as supply and demand return with the decline in mortgage rates, challenges persist, including limited housing supply, elevated home prices, and concerns about affordability, as reflected in a 7.2% weekly drop in mortgage application activity according to the Mortgage Bankers Association (MBA).
Joel Kan, MBA’s deputy chief economist, emphasized that low existing housing supply continues to limit options for prospective buyers and contributes to heightened home price growth, hindering home purchase activity. Affordability concerns have been exacerbated by an increase in the average loan size for purchase applications, reaching $444,100, the highest since May 2022, according to the MBA. Despite these challenges, Redfin’s Homebuyer Demand Index indicates a 6% increase in interest among buyers for home tours and other services, suggesting continued resilience in the housing market.
As industry experts and Wall Street banks anticipate potential rate cuts by the Federal Reserve in response to economic moderation, Fannie Mae housing experts project mortgage rates to decline below 6% by the end of 2024, stabilizing around 5.8%. During the Federal Open Market Committee meeting, Fed Chair Jerome Powell expressed optimism that rates may have peaked, leaving room for potential cuts, but uncertainties persist, with inflation still deemed too high. The latest Personal Consumption Expenditures (PCE) index indicates a 2.6% annual increase in December, below 3% for the first time since March 2021, though sustained evidence of decreasing inflation remains essential to building confidence in the Fed’s goals.