Rates Drop To Lowest Since March

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Rates Drop To Lowest Since March. The anticipation of the Federal Reserve reducing its benchmark interest rate appears to be positively influencing the 10-year Treasury yield, which, in turn, affects mortgage interest rates. Freddie Mac reported This Week in Real Estate that the average borrowing costs for prospective home buyers declined for the second consecutive week and the sixth time in seven weeks. The 30-year fixed-rate mortgage reached its lowest level since mid-March, dropping by 12 basis points from the prior week. Additionally, while homebuilding was strong throughout much of last year and the first quarter of 2024, momentum in the new home market has waned recently. The U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau reported that single-family housing starts fell to an eight-month low in June. Permits for future construction of single-family houses also declined, reaching their lowest level since May 2023. Although the number of single-family homes approved for construction (yet to be started) increased by 0.7%, the overall number of housing units under construction decreased by 1.5%, reaching the lowest level since January 2022. Specifically, the inventory of single-family housing under construction dropped by 1.3%. If this trend in the new home market continues, it could hinder progress in expanding available inventory, ultimately affecting home prices. Economics 101 emphasizes that price is determined by the interplay of supply and demand. When supply remains low, demand persists, leading to stable or rising prices. Below are a few newsworthy events from the third week of July that influence our business:   
AVERAGE RATE ON A 30-YEAR MORTGAGE DROPS TO 6.77%, LOWEST LEVEL SINCE MARCH. The average rate on a 30-year mortgage dropped this week to a four-month low. The rate fell to 6.77% from 6.89% last week, mortgage buyer Freddie Mac said Thursday. This is the second straight weekly drop in the average rate. It’s now at the lowest level since mid-March, when it averaged 6.74%. “Mortgage rates are headed in the right direction and the economy remains resilient, two positive incremental signs for the housing market,” said Sam Khater, Freddie Mac’s chief economist. Home loan rates have eased as the yield on the 10-year Treasury note, which topped 4.7% in late April, has moved lower on hopes of a Fed rate cut. It was at 4.17% in midday trading in the bond market. Mortgage rates could ease further in coming weeks if bond yields continue declining in anticipation of a Fed rate cut. Read the full story here.
SINGLE FAMILY STARTS WEAKEN IN JUNE. Overall housing starts increased 3.0% in June to a seasonally adjusted annual rate of 1.35 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Within this overall number, single-family starts decreased 2.2% from an upwardly reviewed May figure to a 980,000 seasonally adjusted annual rate. However, on a year-to-date basis, single-family starts are up 16.1% thus far in 2024. Overall permits increased 3.4% to a 1.45-million-unit annualized rate in June. Single-family permits decreased 2.3% to a 934,000-unit rate. Multifamily permits increased 15.6% to an annualized 512,000 pace. The total number of single-family homes and apartments under construction was 1.56 million in June. This is the lowest total since January 2022. Single-family homes under construction fell back 1.3%, to a count of 668,000 – down 2.2% from a year ago. The number of multifamily units under construction continues to fall, declining 1.6% to an 895,000 count – down 11.4% from a year ago. The number of multifamily units under construction is now the lowest since August 2022.  Read the full story here.
HOME PRICES ADVANCE ANOTHER 3% IN SECOND QUARTER. Single-family home prices increased 6.9 percent from Q2 2023 to Q2 2024, down from the previous quarter’s upwardly revised annual growth rate of 7.3 percent, according to Fannie Mae’s (FNMA/OTCQB) latest Home Price Index (FNM-HPI) reading. On a quarterly basis, home prices increased a non-seasonally adjusted 3.0 percent in Q2 2024. “Home prices rose again in the second quarter, but the pace of growth slowed as important elements of housing demand and supply inched closer together,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Elevated mortgage rates and ongoing affordability constraints are increasingly limiting homebuyer demand and thus dampening the pace of home price appreciation. Meanwhile, the number of homes available for sale is rising in many metro areas, which is also dampening home price growth. While we expect home price growth to decelerate further in the coming quarters, a still-tight inventory of homes for sale and stretched affordability remain significant challenges and, in our view, are likely to constrain mortgage demand and home sales for the foreseeable future.” Read the full story here.


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