Judging from recent economic indicators and from Federal Reserve Chair Jerome Powell's latest comments about inflation, rates are poised to start coming down soon. Here is what some economists are saying based on their latest observations about the market:
Inventory continues to grow.
A Realtor.com report released last week indicates the number of homes for sale nationwide hit the highest level since May 2020, up 35.8% in August, the 10th straight month of growth.
"In April we noted that rising for-sale inventory was likely to lead to more balance between buyers and sellers. This August, as the number of homes on the market continues to climb, price cuts are more common, asking prices are moderating, and homes are taking longer to sell. The widely anticipated Fed rate cut has already ushered in lower mortgage rates, but it seems that some buyers and sellers are waiting for additional declines," said Danielle Hale, chief economist at Realtor.com.
Mortgage interest rates unchanged.
The average 30-year fixed mortgage rate from Freddie Mac has largely remained unchanged, hovering at around 6.3%. Reacting to this news, National Association of Realtors deputy chief economist and vice president of research Jessica Lautz last week noted although mortgage rates did not move, there was a slight increase in mortgage applications for purchase from the Mortgage Bankers Association.
"Some buyers are taking advantage of lower rates and more housing inventory. While mortgage rates are significantly lower than in recent months, anticipation of a Fed rate cut in two weeks may have buyers reticent to jump in so they can wait for even lower rates. However, as nearly everyone has forecasted a Fed Funds rate cut, it is unlikely to lower mortgage interest rates significantly," said Lautz.
Job gains are light.
NAR chief economist Lawrence Yun has described the net monthly job addition that averaged 116,000 from three months to August as light. "It even suggests the possibility of turning net negative in the upcoming months if the economy hits an unexpected speed bump," he said.
Yun projects the Fed will make possibly two interest rate cuts this year. "The softening job figures suggest that the Federal Reserve will cut interest rates in mid-September, again on the day after the election, and possibly four more times in 2025. The long-term bond and mortgage markets have already incorporated these upcoming changes. That is why the average mortgage rate is 6.3%, measurably lower than the 7% to 8% seen in the past 18 months. Mortgages with full government guarantees, like FHA and VA loans, are already below 6%."
Commenting on fears of a recession during a recent MLSListings online discussion, Dr. Elliot Eisenberg, the multiple listing service's partner economist, told Realtors, "We could be sleepwalking into a recession, but it doesn't matter because real estate transactions right now are low. The point is they historically don't get lower than now. If we have a recession, rates will go down; if there is no recession, rates will come down slower. You've (already) survived the worst."
The economists agree that the sharp decrease in mortgage interest rates in mid-August could lead to an increase in listings in the coming months as lower rates start enticing marginal homeowners to sell. "As the market slows seasonally, fall is one of the best times to buy a house. Falling mortgage rates are likely to bring out additional home shoppers and a busier fall season than usual, but the boost in activity is unlikely to overwhelm the usual seasonal slowdown. Shoppers, who are out this fall, are likely to face lower competition than is expected in spring 2025 as more shoppers anticipate better mortgage rates," said Hale.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
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