Mortgage rates decline in advance of the Labor Day holiday

On the week ending August 31, the average rate on a 30-year fixed-rate mortgage decreased from the previous week’s average of 7.23% to 7.18%.
A 15-year fixed-rate mortgage’s average rate at the time was 6.55%, which was unchanged from the previous week.

Despite this week’s decrease, mortgage rates are still high due to the growing interest rate environment.

Sam Khater, chief economist at Freddie Mac, stated in a statement that “low inventory is keeping house prices steady despite continued high rates.” Recent volatility makes it challenging to predict where rates will go next, but as the Federal Reserve decides its next course of action on interest rate hikes, we should have a clearer measure in September.

Recent months have been difficult for prospective homebuyers due to fluctuating mortgage rates and high housing costs. Because some sellers are reluctant to sell after locking in reduced mortgage rates, many others also find themselves in a competitive market.

But you may still shop around and compare your alternatives to find the best mortgage rate. To compare rates from other lenders without hurting your credit score, go to Credible.

The Federal Reserve plans to raise interest rates in September.
The Federal Reserve has increased interest rates 11 times since 2022 to lower inflation to its 2% target range.
However, the most recent consumer price index (CPI) data provided by the Bureau of Labor Statistics (BLS) show that inflation increased to 3.2% in July. Nevertheless, inflation has decreased from its 9.1% peak in June 2022. Additionally, July saw a drop in job growth.

These readings might not be sufficient to persuade the Fed to alter its course, though.

The Federal Reserve’s inflation target is still being exceeded despite weaker job growth and stable pay growth, according to the report. Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association (MBA), said.

The latest economic indicators continue to send contradictory messages about how strong the economy is, said Kan. Although measures of inflation have decreased, GDP growth in the second quarter was greater than anticipated, and consumer spending is still robust, indicators of the health of the manufacturing and service sectors remain weak.

Fed Chairman Jerome Powell has insisted the institution won’t loosen monetary policy until it is confident it can achieve its objectives.

Powell stated at a press conference in July that “we’ve covered a lot of ground” and that “the full effects of our tightening have yet to be felt.” “In the future, we will continue to use a data-dependent approach to decide how much additional policy firming may be necessary.

Powell stated, “Since the middle of last year, inflation has somewhat abated. “However, there is a long way to go before inflation is back down to 2%.”

Home prices continue to rise.
Redfin’s data shows that the scarcity of available housing has caused property prices to soar. In actuality, Redfin reported that for the four weeks ending July 23, the typical home sold for around $382,000 on average. That represented the biggest jump since November and a 2.6% gain over last year. Furthermore, despite a decline in demand, property prices have remained high.

The company’s Homebuyer Demand Index, which tracks inquiries for tours and other services related to home buying from Redfin agents, decreased 3% from the previous year. Additionally, around 23% fewer mortgage purchase applications were submitted.

Redfin stated in its analysis that the current property market is exceptional since prices are rising despite weak demand.

Redfin’s investigation discovered some regions where home prices experienced noticeable drops despite this trend. Here are some illustrations.

  • Texas’s Austin (-88.8%)
  • Detroit fell by 6.4%
  • Phoenix, down 4.7%
  • Vegas fell by 3.9%
  • Los Angeles (-3.8%)
    Additionally, homebuyers may benefit from the Fed’s declining concerns about a recession. “Preventing a recession means Americans are going to hold onto their jobs, for the majority of part, and feel more secure about purchasing big-ticket items like a house,”   Mortgage rates will certainly remain high for at least a few months, but they will probably start to decline by the end of the year thanks to steady efforts in containing inflation. That ought to spur some buyers and sellers to enter the market.

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