By the end of this year, the 30-year fixed-rate mortgage could drop to 3.3%, which would put the most popular loan product near its lowest average since Freddie Mac began tracking such data 48 years ago.
Lawrence Yun, chief economist for the National Association of REALTORS®, made the prediction after seeing the latest Labor Department report late last week, which showed a slowing job market. “The economy is clearly weakening, and the employment conditions show a lagging indicator,” Yun says. “The soft job gains in August assures that the Federal Reserve will be cutting interest rates.”
The Fed’s benchmark rate doesn’t directly impact mortgage rates but can influence their direction. A weakening economy, coupled with moves by the Fed to lower interest rates, likely will cause mortgage rates to fall as well, economists note. If the 30-year fixed-rate mortgage reaches Yun’s predicted 3.3% average, that would sit slightly above the lowest-ever recorded average of 3.31%, which was set in November 2012, according to Freddie Mac. “But lower rates may not help with affordability because home prices are re-accelerating higher—easily above the latest wage growth,” Yun adds. Inventory shortages also continue to push home prices up.
While housing inventory has eked out small gains in recent months, it’s still “putting upward pressure on home prices of moderately priced homes,” Yun says. “But there is still time to get the economy into a higher gear with increased home building of affordable homes and lessening trade tensions.”
For the first week in September, the 30-year fixed-rate mortgage averaged a three-year low of 3.49%, according to Freddie Mac.
Source: Realtor Magazine