As Federal Reserve policymakers convene this week, expectations are high that they will hold the benchmark interest rate steady. Amidst this anticipation, mortgage rates have shown signs of stabilization.
According to HousingWire’s Mortgage Rates Center, the average rate for a 30-year conforming loan stood at 7.01% on Tuesday, unchanged from the previous week. The 15-year conforming loan rate, which has seen recent fluctuations, averaged 6.79% on Tuesday. This represents a 13 basis point increase from the previous week but remains consistent with two weeks ago.
Logan Mohtashami, Lead Analyst at HousingWire, highlighted that the latest Job Openings and Labor Turnover Survey (JOLTS) report from the U.S. Bureau of Labor Statistics (BLS) indicated minimal cooling in the labor market. Job openings nationwide fell slightly from 8.23 million in May to an estimated 8.18 million in June. Following the JOLTS report, the 10-year Treasury yield, a key factor influencing mortgage rates, experienced only a modest rise.
The comprehensive BLS employment report for July, set to be released on Friday, will provide further insights. The June report revealed a slowdown in job creation, with 206,000 positions added compared to 272,000 in May. The rise in unemployment from 3.6% to 4.1% over the past year and a drop in inflation to 3% annualized suggest that higher interest rates are impacting the economy.
Most analysts predict that Federal Reserve officials will maintain the current benchmark rate range of 5.25% to 5.5% when they meet on Wednesday. The CME Group’s FedWatch tool shows a nearly 96% probability of no rate change, though there is widespread anticipation of a rate cut in September. Fed Chair Jerome Powell is scheduled to address the media at 2 p.m. Eastern Time on Wednesday.
Odeta Kushi, Deputy Chief Economist at First American, noted that the Fed’s June Summary Economic Projections forecast only one rate cut in 2024, a decrease from the three cuts projected in March. However, with ongoing soft inflation data and a weakening labor market, the possibility of additional rate cuts remains, with markets anticipating up to three reductions this year. By the end of 2025, policymakers expect a policy rate of 4.1%, suggesting four more quarter-point cuts.
Mortgage rates have largely remained above 7% this year, significantly affecting home sales while leaving home prices relatively stable. On Tuesday, the CoreLogic S&P Case-Shiller index reported a slowing yearly gain of 5.9% in May, down from 6.5% in February and March. Despite this deceleration, the index achieved a new all-time high for the third consecutive month.
Selma Hepp, CoreLogic’s Chief Economist, attributed the deceleration in yearly gains to the comparison with the robust spring 2023 housing market and the effect of decreased housing demand on price growth. Hepp noted that the housing market saw notable cooling at the end of the spring buying season as mortgage rates surpassed the 7% threshold, which appears to be a significant psychological barrier for prospective homebuyers. June’s existing home sales, influenced by high April mortgage rates, fell to their lowest level since the Great Financial Crisis.
