Many experts don't expect drastic improvement soon, but a shift could finally be underway. The cost of a 30-year fixed mortgage has fallen from above 7% in May to the low-6% range as of last week. This decline is attributed to easing inflation and expectations of the Fed cutting its benchmark interest rate, which indicates a possible stabilization in the housing market.
I think for the next two years, we are in a world where the pressure is on rates to come down," said Daryl Fairweather, chief economist with real estate brokerage Redfin. This indicates a hopeful outlook for prospective homebuyers, suggesting that a reduction in mortgage rates could create a more favorable environment for purchasing homes.
Keith Gumbinger, vice president of research firm HSH.com, noted that a Fed cut may not move mortgage rates much immediately, as investors have already anticipated this decline. However, if the Fed achieves a soft landing and successfully controls inflation, he predicts mortgage rates could drop to the mid-5% range by this time next year.
The relationship between the Federal Reserve's actions and mortgage rates is complex; the central bank's federal funds rate sets a ceiling on borrowing costs while signaling the economy's health. While the Fed's moves don't directly influence mortgage rates, they ultimately shape the environment in which borrowing costs operate, crucially affecting potential homebuyers.
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