Last week brought about two welcome events for real estate homebuyers and sellers— the fed kept the federal funds rate flat, and the 30-year fixed mortgage interest rate had a minor reduction.
The housing industry is hoping this could be a turning point for relief the industry desperately needs.
Last week, the 30-year fixed had a minor reduction to 7.76 percent from 7.79 percent the week prior. At the rate of 7.76 percent, this equates to a typical monthly principal and interest payment of nearly $2,300 for a single family home priced at around $400,000.
Lawrence Yun, Chief Economist for the National Association of Realtors, stated the following in his recent blog, Economists’ Outlook:
The Federal Reserve will be pivoting from raising interest rates to current neutral to eventually cutting interest rates next year. The job market has slowed measurably. The latest monthly job gains of 150,000 in October are one of the weakest in the past three years. The unemployment rate rose to 3.9 percent, close to a two-year high. Wage gains also slowed to 4.1 percent, compared to nearly 6 percent last year, which will lower inflationary pressures.
The bond market is reacting as if the Fed will be cutting rates in 2024. The key benchmark 10-year treasury yield slid down to 4.55 percent and is below a recent high of 5 percent. That means mortgage rates will be coming down. The 30-year fixed rate will stick in the 7 percent range for this year but looks to move down into the 6 percent range by the spring of next year.
Moreover, if the spread between treasury and mortgage were to move from the current abnormal high to just the historical average, the mortgage rates today would already be in the 6.2 percent to 6.7 percent range. Be ready for more home buyers and more home sellers.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.