Time for a pause. Following a seemingly tumultuous previous month in financial markets, this week has offered a respite in the form of relative calm. This tranquility carries favorable news for prospective homebuyers, as data from Freddie Mac reveals a drop of approximately 0.18% in average 30-year mortgage rates compared to the prior week.
What lies ahead? All attention is now directed towards the imminent FOMC meeting next week. While a 25 basis points hike (+0.25%) is largely anticipated by the markets, the focus will be on the forthcoming guidance regarding future rate increases. As previously noted, a noticeable disparity persists between the perspectives of the FOMC and market sentiments. While FOMC members consistently project multiple rate hikes by year-end, market projections are limited to just one.
The Federal Reserve’s steadfast message centers on reining in inflation to achieve its 2% target. Powell’s resolute pledge in June to do “whatever it takes” reflects this commitment. Nevertheless, with each rate increase, the economy faces heightened pressure, escalating the potential recession risk. With the subsequent meeting not scheduled until September, this debate is poised to undergo its share of twists and turns before reaching a resolution.
Homebuyers Should Remain Persistent
Data patterns from the year’s first half indicate that those eagerly awaiting a substantial drop in home prices and mortgage rates might miss out, as will those disheartened house seekers contemplating abandoning their quest. According to the National Association of Realtors (NAR), the median price of existing homes climbed for the sixth consecutive month in June, reaching $410,200. Despite the upward trajectory in costs, NAR data revealed that 33% of listed homes attracted multiple offers, a trend anticipated to persist given the ongoing scarcity of inventory.
While some experts foresee a measure of relief in mortgage rates, a significant downward shift is not anticipated. Chief Bright MLS economist Lisa Sturtevant noted, “It’s unlikely we’ll witness rates below 6% before the conclusion of 2023.” She added, “However, rates are expected to moderate from their summer levels.”