Mortgage rates declined slightly this week, continuing the recent “sideways trend” in the low 6% range. Rates reflect a reduction in inflation and the banking crisis, and are expected to result in federal Reserve (Fed) The federal funds rate is increased.
Thank you for reading this post, don't forget to subscribe!Per Freddie Mac According to the Primary Mortgage Market Survey, the 30-year fixed-rate mortgage averaged 6.35% as of May 11, down four basis points from the previous week’s 6.39%. The same rate a year ago at this time averaged 5.30%.
“This week’s decline continues the recent sideways trend in mortgage rates, which is a welcome departure from last year’s record increases,” Sam Khater, chief economist at Freddie Mac, said in a statement.
“Inflation remains high, its growth rate has moderated and is expected to moderate in the rest of 2023. This should bode well for the trajectory of mortgage rates over the long term,” Khater said.
Overall, inflation eased further in April. The Consumer Price Index (CPI) rose 4.9% year-on-year before seasonal adjustments Bureau of Labor Statistics (BLS). This is the 10th consecutive month when it has come down to the lowest level in two years.
“Freddie Mac’s fixed rate for the 30-year mortgage rate eased to 6.35% this week as the 10-year Treasury yield edged lower,” Jiayi Xu, Realtor.com’s The Economist said in a statement. “In light of a strong jobs report last week, April’s CPI data reinforced that we are very likely at the end of the tightening cycle.”
However, Xu highlighted that the US economy is moving in the right direction, but at a slower pace than desired by the Fed, with inflation twice the 2% target.
“While the labor market data is promising amid recession concerns, it gives little reason for the Fed to cut rates in the short term,” Xu said. “In June, the Fed will release its updated economic projections, and we will have a clearer picture at that time once more data is available.”
In which direction is the market headed?
Xu says that, as long as the economy continues to see progress on inflation, “mortgage rates are expected to remain toward the low end of the 6-7% range.”
Meanwhile, the housing market is facing challenges as home sellers are less active this spring. Apart from the “lock-in effect” of mortgage rates, sellers are facing another problem due to high inflation. Is: The rising cost of home improvements before selling.
mortgage bankers association (MBA) President and CEO Bob Brockschmidt said the recent drop in mortgage rates is good news for potential homebuyers. However, housing supply is still very short in many parts of the country.
“Housing construction has slowed, and some potential sellers are delaying decisions due to economic uncertainty and reluctance to give up their low-rate mortgages,” Brocksmith said in a statement.
Logan Mohtashmi, of housingwire Mortgage rates are not where they should be if their historical correlation with the 10-year US Treasury yield is considered, the lead analyst said. Spreads have been affected by tight financial debt, and the Fed is no longer buying mortgage-backed securities (MBS).
Mohtashmi said, “If mortgage spreads were normal, mortgage rates would be 5.25% today.”
This is below their range for mortgage rates through 2023. Mohtashmi forecasts mortgage rates to remain between 5.75% and 7.25% this year, but “as long as the labor market remains stable, meaning jobless claims in four weeks don’t break past 323,000. Moving average.”
Today’s number is 264,000, Mohtashmi said.
