Mortgage rates decreased for the second consecutive week. However, the 30-year fixed-rate mortgage still hovers just above 7%. Yahoo Finance’s Rebecca Chen joins Wealth! to explain what this could mean for buyers.
Even though rates have been falling for two weeks straight, the number of applications on the market has remained largely unchanged, signaling a continuing affordability crisis facing homebuyers, Chen says.
Mortgage rates have been historically hard to predict, yet many believe that rates could fall to the 6 to 7% range following new inflation data showing moderation. If the Federal Reserve cuts interest rates this year, house prices could still remain high due to an inventory shortage, Chen notes.
For more expert insight and the latest market action, click here to watch this full episode of Wealth!
This post was written by Melanie Riehl
Video Transcript
Turning now to the state of the housing markets, mortgage rates decreased for the second consecutive week, but the 30 year fixed still holds above 7% where it’s hovered since mid April.
So what does this mean for new home buyers out there?
Joining us now, we’ve got our very own Rebecca Chen.
Hey, Rebecca, what do we know here?
And what’s the weight on some prospective buyers out there?
Hey, Brad, thanks so much.
So, this week, we saw mortgage rate, like you said, getting closer to the 7% it dropped to an average of 7.02 for the 30 year mortgage fixed rate on the daily tracking.
We actually saw mortgage rates drop even in a 6% range.
So we are starting to wonder that if we are seeing a downward pattern for mortgage rate that everybody has been talking about since the beginning of the year.
Um aside from just tracking this mortgage rate and how it’s um the whether it’s heading up or down.
We also been tracking how home buyers are reacting to these mortgage rates.
And what we saw this week is that even the rate has been dropping for two weeks straight.
There hasn’t been that much home purchase application on the market right now.
And what that’s telling us is that home buyers are still not convinced or not motivated to come back to the market because financing cost is still too high for them just to put everything into context again.
Right now.
At around 7% we are more than double the mortgage rate cost than three years ago.
So what home buyers are paying today in terms of um to their bank is a lot higher than they would be in 2021 when rates were around 3%.
So definitely we are seeing a little bit more activity and a little bit more drop in the mortgage rate, but there just hasn’t been enough of it to entice more buyers to come back to the market.
And then I think what this really tells us is that first time home buyers or really any buyers are highly sensitive to today’s rate.
And um given that it’s been very volatile, going up and down um a week every single week, um we are thinking are seeing that this has a huge correlation to what um buyers can afford today.
And so with that in mind, Rebecca and with also the caveat that this is largely hinging on the Fed and what they do in the coming months, when could we see rates coming down?
That is a million question right now, Brad.
Uh to be honest, nobody knows when mortgage rate is coming down.
One expert even told me that mortgage rates are famously known for being hard to predict and we can definitely see that right now because I feel like every week uh when we talk to experts, they think it’s gonna go one way, but it ends up going another.
So it’s hard to tell where it’s going to come down.
But what I can say is this um given what has been happening with the fed with the inflation data.
And CP I, most experts are saying that rates will probably fall further from today into the 76 to 7% range for the remainder of 2024.
What this means is we will see some kind of rate cut later on in the year and that will bring mortgage rate down for home buyers.
And I do kind of want to talk about a little bit about what everybody we’ve seen across different financial institutions, Fannie Mae Wells Fargo, all these financial institutions, they changed their forecast recently from the beginning of the year and all of them upward revised their forecasts on mortgage rates.
And when I talk to them, they say it’s because they just see inflation being so stubborn and the possibility of cutting rate anytime soon is getting smaller and smaller.
And that is why everybody is upward revising their mortgage rate today.
And what this means for housing market.
I I think that’s probably what all the home buyers are wondering right now.
What can this mean?
Uh if it’s 6 to 7% and if rates are being collated, essentially, what it really means is that you could have, when this happens, you could have a smaller financing cost, but it probably won’t do much to the housing price because we are still in a very shortage.
We still see a huge shortage of inventory supply on the housing market and inventory shortage is what is driving prices the most right now.
Um So all that being said, there’s still a lot of uncertainty in the housing market.
Um but we’ll be tracking mortgage rate very closely every week.