facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Why Mortgage Rates are Holding Steady Thumbnail

Why Mortgage Rates are Holding Steady

Expectations for a drop in mortgage rates in the coming months have shifted as new economic data has arrived. Inflation at 3.4% (annual, as of April) remains stubbornly above the Fed’s 2% target. The Fed is unlikely to reduce rates until they’ve seen multiple positive (lower) inflation readings -- unless other economic indicators take a nosedive. Watch the labor market in particular.

This Spring, the Fed signaled that they’d continue to hold their benchmark rate level, so mortgage rates, which were trending down in anticipation of lower future rates, did an about-face and popped up over the 7% mark. Recent softening in the Core Consumer Price Index (which strips out volatile food and energy prices), and softer jobs data has lowered the 10-year bond rate, and with it, we saw improved mortgage rates during the first half of May. A bit of wiggle room for buyers!

At the same time, the tight housing inventory situation continues, so prices are firm and continuing to rise (though not quite as quickly). For the first quarter of 2024, median home prices are up 5% nationally, versus last year. “Astonishingly, greater than 90% of the country’s metro areas experienced home price growth despite facing the highest mortgage rates in two decades,” NAR chief economist Lawrence Yun said.

The reason? Get used to it -- not enough housing inventory on the market. The number of move-up buyers as well as downsizing retirees, has been below normal -- in part due to “mortgage lock,” the 40% of homeowners who are sitting tight with a near-3% loan obtained back when rates were at record lows. Some of these potential sellers are reluctant to list their home when their next mortgage would be a more expensive one. Another factor is that new construction isn’t adding enough overall supply to meet housing market demands.

What’s ahead? Experts predict a continued cool-down in the market, with a slower pace of price appreciation. On the mortgage rate side, investors currently see a 50% chance of a Fed rate cut in September, and most experts believe that mortgage rates will end 2024 in the 6.5% to 7% range – again, depending a lot on inflation and the labor situation.

Our advice? Don’t get caught waiting for rates to drop a lot. Because when they do, there is likely to be a flood of pent-up demand entering the market, and sharply higher home prices. If you’re interested in buying, it’s usually better to get ahead of the market and pay a higher mortgage rate for a while, then refinance when the time is right. Remember, it’s “time in the market” versus “timing the market.” Give us a call today to discuss your goals, and we’ll help you craft a home financing plan that’s a winner regardless!

Get the latest mortgage industry news. Click here

Copyright © 2024 Myers Capital Virginia