After reaching a post-pandemic high of 7.8% last fall, the average 30-year mortgage rate is now expected to end the year below 6%. According to Fannie Mae analysts.
However, even as the housing market rebalances, home sales rates are expected to remain below their long-term trajectory.
The 30-year mortgage rate is currently around 6.6%. Mortgage rates tend to work against demand for U.S. Treasuries. In other words, when demand for bonds increases, mortgage interest rates decrease.
And demand for bonds is increasing thanks to the economic slowdown. Specifically, the 10-year Treasury yield has fallen nearly 1% from its October peak.
“The outlook for both short-term (bond) and mortgage rates is clearly lower than we previously expected,” Fannie Mae analysts said.
But analysts said they were withdrawing their “explicit call” for a recession in 2024, even though growth is expected to remain below trend this year. This forecast is a result of “easing” financial conditions, that is, loosening of lending restrictions and income. The growth rate exceeded the inflation rate.
Already, refinancing is rapidly increasing due to the impact of falling interest rates, and it is expected that this will lead to a “thaw” in the existing home sales market, which is currently affected by the so-called lock-in effect. The house would be too expensive.
But analysts warn that the housing market is still far from stabilizing. “We expect it will take many years for home sales rates to fully recover to pre-pandemic levels, as housing affordability remains low by historical standards relative to household incomes,” the analysts wrote. remains very low.”
As a result, financial services companies have made separate forecasts. core logic showaverage U.S. home prices will only rise by low to mid-single digits this year.
The conservative forecast shows that the housing market, once subject to wild swings in demand that drove prices soaring just a few years ago, is gradually readjusting.