Mortgage rates
This week's average for the 30-year fixed is almost half of one percentage point lower than a year ago.
"Mortgage rates plunged this week to their lowest level in over a year following the likely overreaction to a less than favorable employment report and financial market turbulence for an economy that remains on solid footing," said Sam Khater, Freddie Mac's chief economist, in a press release.
The 30-year FRM averaged 6.47% for Aug. 8, compared with last week at 6.73%
Meanwhile, the 15-year FRM averaged 5.63% versus 5.99% for Aug. 1 and 6.34% for the same week in 2023.
The 10-year Treasury, whose yield dropped as low as 3.67% on Aug. 5, by Thursday morning at one point crossed back above 4%, although at 11 a.m. it was 0.5 basis points below that mark.
At that time on Thursday, Zillow's rate tracker was at 6.14%, down 3 basis points from the previous week's average. But on Monday, 30-year rates actually fell below 6%, according to Zillow's measurements.
Optimal Blue's rate tracker for the 30-year conforming FRM went from 6.674% on July 31
At one point, market observers were calling for an immediate short-term rate cut by the Federal Reserve but as bond yields started tending back up, those shouts abated.
Rates fell this week on renewed fears of a recession, said Orphe Divounguy, senior economist at Zillow Home Loans, in a Wednesday night statement.
"However, recession fears are overblown," Divounguy explained. "Although the labor market is cooling, real gross domestic product growth — a combination of employment and productivity — continues to exceed expectations. While employment may be rising at a slower pace, productivity growth has risen."
Taking a somewhat opposite view is Cam Harvey, senior advisor and director of research at investment manager Research Affiliates. Harvey believes a recession is impending, although a soft landing is possible.
But Harvey blames the Federal Reserve for the current situation.
"They overshot with rates and have held rates at a level far too high for far too long," Harvey said. "The Fed's actions have increased the probability of a hard landing — but I am still betting on a soft landing."
Harvey compared the current situation with what the Fed did in 2007 when
Today's circumstances are different and one primary reason is the change in the residential real estate market.
"The equity in housing is much higher," citing the
If any real estate-related problems exist, it is in the commercial side, and in particular office properties, Harvey said.
But besides the high homeowner equity numbers, other pros for a soft landing include "job openings that roughly match the number of job seekers, lower big bank leverage and corporate balance sheets that have benefited from some risk management in the face of an inverted yield curve," Harvey said.
Lender Price product and pricing engine data
"The decline in mortgage rates does increase prospective homebuyers' purchasing power and should begin to pique their interest in making a move," Khater said. "Additionally, this drop in rates is already providing some existing homeowners the opportunity to refinance, with the refinance share of market mortgage applications reaching nearly 42%, the highest since March 2022."
Mortgage rates as tracked by Redfin fell to a daily average of 6.34% on Aug. 5, the lowest since April 2023.
But home sales have yet to improve, even as the market becomes more affordable in recent weeks.
The median sale price was $389,750 during the four-week period ended Aug. 4. That is more than $6,000 below early July's all-time high and on a year-over-year basis, the 3.2% gain was the smallest in nine months.
"Many of the buyers I'm working with are excited because they've been casually house hunting for a year, waiting for rates to come down before they make an offer, " said Shoshana Godwin, a Redfin agent. "Now a lot of those buyers want to get in now, before rates get too low and cause more competition."
The housing market is likely to go above $50 trillion in equity at some point in the next 12 months, a separate Redfin release noted. Currently it is at $49.6 trillion.
"Mortgage rates have started falling, but many potential sellers and buyers are waiting to make a move, meaning we are likely to continue seeing a pattern where prices slowly tick up," Chen Zhao, Redfin economics research lead, said. "That's great news for the millions of American homeowners who see their equity rising, but first-time buyers are going to keep finding it tough to find an affordable home."
More imminently, the mortgage industry can look forward to more gyrations in rates because of upcoming economic data releases.
"Next week's release of important inflation readings, the Consumer Price Index and the Producer Price [Expenditures] Index, will likely cause investors to reassess their forecasts," Divounguy said. "That means more rate volatility ahead."
