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June 23, 2024

Mortgage Rates Hold Steady as Market Awaits Further Data

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Jan 4, 2024

Mortgage rates showed little movement this week, holding just above 7% as the market waits for more economic data to provide direction. This pause comes after a dramatic drop in rates over the past two months, providing some relief to homebuyers even as prices remain high.

Rates Level Off After Sharp Decline

As recently as October, 30-year fixed mortgage rates peaked above 7.5%. But a series of positive financial reports helped spur a plunge in rates over November and December. The average 30-year fixed rate fell to 6.92% by the start of January, though it still remains well above the 3% rates seen during parts of 2021.

This week, rates have edged up slightly to around 7.1%. Analysts say we’re seeing a holding pattern as markets await critical jobs data and other indicators that could shift rate expectations.

“Mortgage rates started off 2024 relatively flat, with some minor day-to-day fluctuations,” said Matthew Graham, Chief Operating Officer at Mortgage News Daily. Rates remain well below late-2022 highs, but how long will this pause last?

What Will Mortgage Rates Do Next?

Economists expect rates to resume their downward trajectory later this year, potentially dropping below 7% and perhaps even approaching 6%. But the timing and speed of future declines remains uncertain.

Factors Impacting Rate Forecasts

Factor Description Rate Impact
Federal Reserve Policy Further interest rate hikes could drive mortgage rates higher, but markets expect the Fed to stop or even reverse course later in 2024 Mixed
Inflation Falling inflation may let the Fed stop raising rates, allowing mortgage rates to fall Downward
Employment Trends A potential economic slowdown could soften labor market and lead to lower rates Downward
Global Factors Issues like rising oil prices or new COVID waves could spur volatility Mixed

For now, the biggest wild card is tomorrow’s U.S. jobs report. Strong job growth will likely reinforce expectations of further Fed rate hikes. But a weak report could signal an earlier-than-expected economic downturn, giving mortgage rates room to drop.

Homebuyer Demand Still Robust

Despite lingering affordability issues, buyer demand remains resilient heading into the spring home shopping season. Many are rushing to lock in rates before any potential Fed-driven increases.

“If you were thinking of buying a home, now is the time,” said Annemarie Dowling, a broker with Berkshire Hathaway HomeServices. “Rates are good even if prices aren’t.”

At the same time, housing inventory remains near record lows. This combination of strong demand and limited supply continues to put upward pressure on home prices.

So while lower interest rates may provide short-term savings on mortgage payments, rising home values are offsetting some of those benefits, especially for first-time homebuyers. Home prices rose over 10% last year alone according to the Case-Shiller Index.

And with builders still facing construction delays due to supply chain issues and labor shortages, inventory relief may be slow to materialize.

Refinancing Window Stays Open

For those who already own a home, refinancing into lower rates can still provide major savings. Here is a look at some key refinancing considerations as we start 2024:

  • Rates Still Historically Low – Though higher than last year, rates around 7% remain favorable for many homeowners.
  • Equity Gains to Tap – Surging values give homeowners chance to cash out equity or drop PMI.
  • Flexible Terms – Lenders offering 40, 35, 30, 20, 15, 10 year loans with competitive rates.
  • Streamline Options – Many homeowners can use “streamline refis” to skip appraisal and documentation.
  • Tax Benefits – Interest may still be tax deductible for some filers.

Homeowners with mortgages from 2020-2022 are in especially good position to save over $200/month or more via refinancing. You can check your potential savings and today’s rates through sites like NerdWallet and Bankrate.

While a bit of an increase this week, experts think mortgage rates still have more room to fall this year as the market stabilizes. We’ll have to see whether the January jobs numbers reinforce or challenge rate expectations tomorrow. Those looking to buy or refinance may want to lock in current rates before any Fed-induced swings.

But no matter whether rates tick up or down in the short run, one thing is clear – volatility will continue. Make sure to closely monitor markets using resources like Mortgage News Daily if timing your real estate plans for 2024.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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