Mortgage Rates Continue to Decline
Mortgage rates have steadily declined over the past few months, with the 30-year mortgage rate falling by more than 1.0% since April 2024, bringing rates to their lowest levels since February 2023. As of early September, mortgage rates are nearing the point where they could start with a “5,” which could have a significant psychological impact on both potential homebuyers and those looking to refinance. Real estate agents should be aware that while rates are dropping, potential borrowers may be holding off to see where rates ultimately settle.
Treasury Yields and Economic Sentiment
The US Treasury yield curve, which had been inverted for much of the past year, is starting to normalize. The spread between the 10-year and 2-year Treasury yields is now positive, signaling expectations of aggressive Federal Reserve rate cuts combined with modest inflation in the near future. As the curve flattens PG – re-steepens, it reflects growing optimism in the markets. However, the key question remains: how low can the 10-year yield go, and will this enthusiasm be sustainable?
Inflation and Economic Outlook
The latest inflation data shows positive signs, with the August Consumer Price Index (CPI) year-over-year figure declining to 2.5%, down from 2.9% in July. Core inflation, which excludes volatile food and energy prices, also dropped slightly to 3.3%. While still above the Federal Reserve’s 2% target, these numbers suggest that inflation is low enough to support future rate cuts. The Fed’s focus is shifting from controlling inflation to addressing the job market, but the question remains whether they are moving too quickly in declaring “mission accomplished” on inflation.
Mortgage Applications: A Slow Recovery
Despite the downward trend in mortgage rates, purchase activity remains sluggish. Lower rates have not yet sparked a significant rebound in mortgage applications. Several factors could be contributing to this hesitation, including potential buyers waiting to see where rates ultimately settle, concerns about affordability given record-high home prices, and economic uncertainty ahead of the 2024 elections. Real estate agents may find that buyers are cautious and looking for stability before making major purchasing decisions.