After a tough spring and summer, there’s hope for the housing market as fall arrives and mortgage rates drop.
Recently, bond yields fell sharply, following a disappointing job report that made many believe the Federal Reserve might reduce rates soon. The 10-year Treasury yield dropped to 4.08%, the lowest since April.
In the meantime, the average 30-year fixed mortgage rate decreased by 0.16% to 6.29%. This drop is significant—it’s the largest single-day decline since August 2024. Some lenders are offering even better rates, dipping below 6.30%. Matt Graham, COO of Mortgage News Daily, noted that many lenders are now quoting rates around 5.9%.
A year ago, mortgage rates also saw a plunge, but things are different this time. Back then, rising unemployment raised concerns about a recession, just like now. The Fed did cut rates last year, but it surprised investors with a substantial half-point cut that led to improved jobs data. That boost in the economy caused bond yields to increase again.
Until recently, the job market appeared strong despite ongoing tariffs that kept inflation and mortgage rates high. However, last month, the job report revealed only 22,000 new jobs added in August, falling far short of predictions.
Torsten Sløk, chief economist at Apollo Global Management, mentioned that while jobs in tariff-impacted sectors are declining, other sectors still show some growth. This shift has led Wall Street to anticipate the Fed will begin easing rates, moving their focus from inflation concerns to job losses.
Graham pointed out parallels to last year but cautioned that the current economic data would determine the trajectory. If rates fall below 6%, buyers may return, especially since they were above 7% just a few months ago.
Home prices and borrowing costs have kept many potential buyers at bay. In fact, the Fed is watching the housing market closely, with sales of existing homes remaining largely stagnant this year. Although listings have increased, demand is low, limiting price growth. New construction is also slow, as building permits trend down.
A recent report revealed a 0.1% drop in the number of U.S. homeowner households, marking the first decline since 2016, with 86.2 million households now owning homes. Chen Zhao from Redfin attributes this downturn to “rising home prices, high mortgage rates, and economic uncertainty,” making homeownership increasingly difficult.
As we move into fall, the housing market is at a crucial turning point. With rates down and potential shifts in policy, it could lead to renewed activity as buyers look for opportunities.
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