Mortgage rates fall for the first time in five weeks as experts adjust their forecasts

The average 30-year fixed mortgage rate fell to 7% this week, settling at 7.09%, according to Freddie Mac. This is the first time the weekly average rate has fallen in more than a month.

Recent rate volatility – including this week’s 7.22% drop and last month’s steady rise – has led some financial institutions to modify their mortgage outlooks for the rest of 2024.

“An environment where rates continue to be above 7 percent impacts both sellers and buyers. Many potential sellers remain hesitant to list their homes and forgo lower mortgage rates from previous years, negatively impacting supply and keeping home prices up high,” said Sam Khater, Chief Economist at Freddie Mac. “These high home prices add to the overall affordability challenges potential buyers face in this high-rate environment.”

See more information: Mortgage Rates Today, May 9, 2024: Rates Drop for First Time in Weeks

Experts adjust outlook for the end of the year

Robust economic data and persistent inflation have led housing experts to change their forecast for where rates would land by the end of 2024.

Fannie Mae, a government-backed mortgage lender, raised its year-end forecast to 6.4% from 5.9% earlier this year.

“Our … forecast includes the Fed cutting interest rates by 25 basis points twice in the fall,” Douglas Duncan, chief economist at Fannie Mae, told Yahoo Finance.

The Federal Reserve held the federal funds rate steady last week. Meanwhile, mortgage rates – influenced by the Fed’s benchmark index – have surpassed 7% over the past three weeks.

To meet or come close to the modified forecast, Duncan said core personal consumption expenditures (PCE) – the Fed’s preferred gauge for inflation – will have to fall to 2% for at least three consecutive months. The latest core PCE gained 2.8% in March year over year.

The National Association of Realtors (NAR) now expects average rates to settle at 6.5% until the end of the yearmodified from the 6.3% predicted at the beginning of the year.

“The Federal Reserve delayed rate cuts,” said Lawrence Yun, chief economist at NAR. “I would have thought by now rates would be lower and the rate cuts would have started. Any rate cuts the Federal Reserve doesn’t make this year will simply be delayed until 2025. They’re calling for a rate cut in September, but we’ll see.”

See more information: Mortgage Rates As High As 7% – Is This A Good Time To Buy A Home?

Homebuyers hesitate amid volatile rates

Higher rates for longer mean homebuyers must shell out more of their monthly salary to buy a home.

The story continues

At this week’s average rate, buyers would pay $1,611 monthly for a $300,000 home with a 20% down payment. In contrast, the same home and payment cost $1,004 in the same week in 2021, when the average mortgage rate was 2.94%, according to Yahoo Finance’s mortgage calculator.

The national average pay surpassed $2,200 in March, from $2,184 the previous month, according to the Mortgage Bankers Association. Monthly mortgage payments are up more than 5% from last March.

The general climate is creating pessimism regarding the real estate market: almost 80% of consumers say this is a bad time to buy a home. Fewer Americans think mortgage rates will fall in the next 12 months.

“[Consumers have] Over the last six months, we have seen a few cases where rates rose significantly, then fell again, and then rose again,” Duncan said. “If we consider the combined uncertainty about whether the Fed will cut rates… it’s easy to see why consumers would be uncertain and unlikely to take action in the near term.”

Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).

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