Last week, mortgage rates slipped for the first time in over a month, with the 30-year fixed mortgage rate hitting 7.09%.
Yahoo Finance’s Rebecca Chen reports:
Recent rate volatility — including this week’s drop from 7.22% and last month’s steady rise — has prompted some financial institutions to modify their mortgage outlook for the rest of 2024.
“An environment where rates continue to hover above 7% impacts both sellers and buyers. Many potential sellers remain hesitant to list their home and part with lower mortgage rates from years prior, adversely impacting supply and keeping house prices elevated,” said Sam Khater, Freddie Mac’s chief economist. “These elevated house prices add to the overall affordability challenges that potential buyers face in this high-rate environment.”
Robust economic data and stubborn inflation have driven housing experts to change their forecast of where rates will land at the end of 2024.
Fannie Mae, a government-backed mortgage institution, increased its year-end prediction to 6.4% from 5.9% earlier this year.
“Our … forecast includes the Fed cutting interest rates 25 basis points two times in the fall,” Douglas Duncan, Fannie Mae’s chief economist, told Yahoo Finance.
The Federal Reserve held the federal funds rate steady last week. Meanwhile, mortgage rates — influenced by the Fed’s benchmark — have surged past 7% over the last three weeks.
To land at or near the modified forecast, Duncan said the core Personal Consumption Expenditure (PCE) index — the Fed’s preferred gauge for inflation — will need to drop toward 2% for at least three consecutive months. The latest core PCE gained 2.8% in March year over year.
The National Association of Realtors (NAR) now expects average rates to settle at 6.5% by year-end, modified from the 6.3% predicted at the beginning of the year.
“The Federal Reserve has delayed rate cuts,” said Lawrence Yun, NAR’s chief economist. “I would have thought that by now, rates would be lower and rate cuts would have begun. Whatever rate cut the Federal Reserve does not do this year will simply get pushed back to 2025. They’re calling for a September rate cut, but we’ll see.”
