This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.
Rates are provided by Housing Wire in conjunction with Polly. Rates are updated in real-time. Polly data is calculated using actual locked rates. Rates are inclusive of locks that occur below par, at par and therefore consider discounts and rebates.
Market Commentary:
For the week of May 10th to May 16th, interest rates remained unchanged. Mortgage rates are tied to inflation. In a bit of good news, inflation is cooling down slightly. The U.S. Labor Department said on May 15th that the inflation rate had dipped to 3.4 percent. That news heartened investors, but it’s unclear whether the Federal Reserve will cut rates any time soon. The central bank left rates unchanged in May — and the latest numbers show inflation is still well above the Fed’s target of 2 percent.
Mortgage rate forecasts:
Fannie Mae, the Mortgage Bankers Association, and the National Association of Realtors predict that mortgage rates will drop over the next 12 months for purchase transactions. Refinances and Cash-out refinance transactions will be higher.
Fed Watch:
Target rate (in bps) possibilities, according to the CME Group:
|
Upcoming Federal Reserve Meeting Dates |
Current (5.25% - 5.50%) |
0.25% Reduction (5.00% - 5.25%) |
0.5% Reduction (4.75% - 5.00%) |
|
June 12 |
91.3% |
8.7% |
0.0% |
|
July 31 |
68.6% |
29.2% |
2.2% |
|
September 18 |
31.6% |
50.5% |
16.8% |
Market Review:
Per Black Knight's Production Metrics, the breakdown of mortgage production volume is as follows: 85.34% for purchase transactions, 10.21% for cash-out refinances, and 4.46% for rate and term refinances.
Per Black Knight 50.66% of all Retail loan production were Government Loans (FHA, VA, USDA), while 49.35% were Conventional and Non-Conforming loans.
Homes are overvalued in much of the U.S. — with these 5 states leading the list:
-Redfin
Property Percentages:
Recent research shows that for every percentage point that mortgage market rates exceed the rate currently enjoyed by the homeowner, the probability of sale is reduced 18.1%. This led to a 57% reduction in home sales with fixed-rate mortgages in 23 Q4, and a reduction of 1.33 million sales between 22Q2 and 23Q4. The supply reduction boosted home prices 5.7%, outweighing the impact of higher rates, which reduced prices by 3.3%.
- Elliot F. Eisenberg, former Sr. Economist with National Association of Home Builders
News You Can Use:
- Fed’s Powell is unfazed by the latest hot inflation reading
- CPI inflation report resets timing of Fed interest rate cuts
- 5 Metros That Will Become Instantly More Affordable If Mortgage Rates Drop
- New-Home Construction Rebounds in April Despite Higher Mortgage Rates
- Mortgage rates will ‘lead the way’ lower ahead of Fed rate cut, says Matt Graham, Chief Operating Officer at Mortgage News Daily,
*Communication is intended for Industry Professionals only and not intended for Consumer Distribution
Interest rate and annual percentage rate (APR) are based on current market conditions as of 05/16/2024, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 05/16/2024 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac's economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac's business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an "as is" basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.
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