This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.
Market Commentary:
For the week of April 19th to April 25th, interest rates increased. Today's CORE PCE Price numbers (a measure of how much U.S. households spend on goods and services) came in significantly hotter than expected; an increase of 1.7% from last month. Inflation continues to be a concern and Friday, April 26th CORE PCE inflation numbers will give a direction of where the market is headed. The previous month's numbers were 2.8%, forecast is 2.6%, and if inflation data comes in higher there is a lesser likelihood of the Fed cutting interest rates any time soon.
Expert Mortgage Rate Predictions:
Most experts expect rates to remain elevated in the near future, with a possibility of some decrease later in the year.
Freddie Mac: Their forecast sees rates remaining above 6.5% at least through the second quarter of 2024.
Fannie Mae: Their revised outlook anticipates a 30-year fixed rate reaching 6.4% by year-end, slightly higher than their previous estimates.
National Association of Realtors: Chief economist Lawrence Yun suggests rates will likely hover between 6% and 7% for 2024. He cites factors like inflation and the budget deficit as contributing influences.
Looking ahead, the predictions for mortgage rates over the next two years suggest a gradual decline. Experts from various financial institutions and housing associations have weighed in, providing a consensus that, while the rates may not see a dramatic drop, there is an expectation of a downward trend.
The Mortgage Bankers Association (MBA) forecasts that the 30-year fixed-rate mortgage will end 2024 at 6.1% and reach 5.5% by the end of 2025. This aligns with the sentiment from other industry analysts, who anticipate that the Federal Reserve's potential rate cuts could ease the mortgage rates slightly.
The National Association of Realtors echoes this outlook, projecting that mortgage rates will average around 6.8% in the first quarter of 2024, with a gradual decrease to 6.1% by the year's end.
Fed Watch: Target rate (in bps) possibilities, according to the CME Group:
Market Review:
Per Black Knight's Production Metrics, the breakdown of mortgage production volume is as follows: 88.80% for purchase transactions, 8.77% for cash-out refinances, and 2.43% for rate and term refinances.
Receding Recession
In an early April survey of business and academic economists, the percentage predicting a recession within the next two years declined from 39% three months ago to 29%. This is the lowest percentage since 4/22 when recession chances were pegged at 28%. Better yet, just 10% expect at least one quarter of negative growth over the next 12 months, down from 33% in January. I'm also slightly more optimistic.
- Elliot Eisenberg, Ph.D. , Economist
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