Rates Decrease Again, Fed Signals Interest Rate Cut
Mortgage rates decreased again this week, another 11 basis points from last week according to the Freddie Mac Primary Mortgage Market Survey released August 29th. With expectations of a Fed rate cut now clear, rates are expected to continue their decline and while potential homebuyers are watching closely, a rebound in purchase activity remains elusive until further declines are seen.
Mortgage applications increased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending August 23, 2024. “Mortgage rates declined for the fourth consecutive week, with the 30-year fixed rate at 6.44 percent, the lowest since April 2023. Rates have now come down more than 80 basis points from a year ago,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase.”
The number of Americans filing new applications for jobless benefits slipped last week, but re-employment opportunities for laid-off workers are becoming scarcer, a sign that the unemployment rate probably remained elevated in August. Initial claims for state unemployment benefits fell 2,000 to a seasonally adjusted 231,000 for the week ended Aug. 24th. While the labor market slowdown positions the Federal Reserve to start cutting interest rates next month, the data argues against a 50-basis point reduction in borrowing costs. “The soft-landing narrative for the economy remains intact for now,” said Christopher Rupkey, chief economist at FWDBONDS.
At the most recent Fed meeting, Federal Reserve Chair Jerome Powell gave an unambiguous signal that the long-anticipated U.S. interest rate cut would come next month. At his keynote speech to the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming, Powell said, “The time has come for policy to adjust,” given that upside risks to inflation have diminished and downside risks to employment have increased. “We do not seek or welcome further cooling in labor market conditions,” Powell said. “We will do everything we can to support a strong labor market as we make further progress toward price stability. “
