This week we’re sandwiched between two weeks of higher impact events. Last week’s major Fed Meeting and next week’s slew of important reports including the monthly Jobs Report has us in a bit of a holding pattern this week.
However, I thought it interesting to point out regarding mortgage rate trends in a broader, recent historic perspective, the average rates for a 30-year fixed hit over 8 percent in October of last year and since, hit their lowest point at 6.6 percent in late December 2023. The latest survey of average rates by Freddie Mac reported that the average 30-year fixed rate was 6.87. Not a huge range!
So, to me this says that rates have remained pretty steady over the course of 2024 so far. Of course they change and move daily and we have no way to predict exactly where they’re headed. But if you are waiting or bracing for some huge change in rates, we’ve seen pretty smooth sailing over the last, almost, six months!
The actions of the Fed has always been a factor that can affect the movement of rates, including their economic forecast and what their plans are with the key interest rate that they set (let’s be clear, they do not set mortgage rates). Traders watch their moves to help them determine their own moves and last week the Fed decided to keep their interest rate the same – no rise, no cut.
However, the Fed also said they see economic growth as stronger than expected, with a lower threat of recession. And they predict the unemployment rate will come in lower than forecasted but inflation will be higher. We’ll see how it all materializes in next week’s Jobs Report due out on Friday, April 5th.
The final note from the Fed Meeting last week is that they are still saying they plan three rate cuts this year. Yet with only 6 more Fed Meetings set for 2024 those cuts are coming soon, if the data cooperates with their targets. Currently the financial markets have the probability of a rate cut in June at 75 percent. I’ll be keeping an eye on the data to see if this changes, because a cut in Fed Funds could help mortgage rates improve as well. We’ll have to wait and see!
As for housing data this week, numbers for New Home Sales came out showing that thanks to mortgage rates in January moving lower they helped lift new home sales to a 661,000 annualized rate from 651,000 in December. For February the rise in sales was much more subdued, however consistent at 662,000 annualized.
Home prices also continued to moderate according to both the Case-Shiller Home Price Index and the FHFA Home Price Index.
On Friday we get a look at the Fed’s favorite indicator and based on the Fed’s comments after their meeting last week, there will be lots of interest by traders and market watchers to see how inflation comes in so we can adjust our timelines around when Fed Funds rates might be cut.
As of now, inflation readings for February are expected at monthly increases of 0.4 percent overall versus 0.3. Annual rates are expected at 2.5 percent overall and 2.8 percent for the core (versus January’s 2.4 and 2.8 percent which were also both as expected). As we know, the Fed is looking for annual rates between 1-2 percent to begin cutting rates.
I’ll be keeping an eye on all of it and report back next week!
