Mortgage rates may moderate in coming months, as recent economic reports show promising signs that inflation could be cooling in a more sustainable fashion for the rest of the year, according to a recent report from the California Association Of Realtors (CAR).
Meanwhile, the Central Bank is still expected to cut rates later this year, but at a more moderate pace than previously anticipated.
This is while the Federal Reserve has decided to hold rates steady for the immediate future.
As Bankrate.com also reported, “The Federal Reserve announced that it’s holding interest rates steady following its June 11-12 meeting, leaving the federal funds rate at a target range of 5.25 to 5.5 percent.”
This is the eighth time in the last nine meetings that the Fed has left rates unchanged, said Bankrate, though the central bank has raised rates a total of 11 times during this economic cycle in an effort to tamp down high inflation.
The Fed’s decision comes as inflation hit 3.3 percent year-over-year in May, after reaching the highest levels in decades at over nine percent in mid-2022. The last time the Fed raised rates was at its July 2023 meeting, Bankrate reported.
“With only one hike in the past nine meetings,”Bankrate noted, “consumers should expect rates to eventually decline, though stubbornly high inflation will dictate the timing of any decrease.”
As such, said the CAR report, home sales are projected to improve in the second half of the year, but the growth rate will be slower than what was projected earlier this year.
Inflation also cooled during the month, with the May headline Consumer Price Index (CPI) remaining flat month-over-month.
The monthly increase was the lowest reading since July 2022.
According to the US Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis, after rising 0.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment.
More than offsetting a decline in gasoline, the index for shelter rose in May, up 0.4 percent for the fourth consecutive month. The index for food increased 0.1 percent in May. The food away from home index rose 0.4 percent over the month, while the food at home index was unchanged. The energy index fell 2.0 percent over the month, led by a 3.6-percent decrease in the gasoline index.
Home Purchase Sentiment released by Fannie Mae declined in May as mortgage rates surged to the highest levels since December at the start of the month, said the CAR report.
The Fannie Mae (FNMA/OTCQB) Home Purchase Sentiment Index® (HPSI) decreased 2.5 points in May to 69.4 as the component measuring consumer attitudes toward home buying conditions fell markedly, reaching an all-time survey low.
This month, only 14% of consumers indicated that it’s a good time to buy a home, down from 20% last month, the HPSI showed, while the share believing it’s a good time to sell fell from 67% to 64%.
Meanwhile, said the Fannie Mae report, consumers continue to believe affordability will remain tight for the foreseeable future, as respondents believe that, on net, home prices and mortgage rates will go up over the next year. Among the positives from the survey: A growing share of respondents, now 20%, indicated that their household income is significantly higher than it was a year ago. The full index is up 3.8 points year over year.
Homeowner equity rises nearly double digits from a year ago: Homeowner equity jumped again on an annual basis in Q1 2024 as home prices continued to rise in the past 12 months, according to the latest CoreLogic Homeowner Equity Insights report.
Homeowners with mortgages in the U.S. have seen an aggregated increase of $1.5 trillion in equity since Q1 2023, a jump of 9.6% year-over-year. Mortgaged residential properties with negative equity declined 2.1% from Q4 2023 and 16.1% from Q1 2023. Roughly 1.8%, or one million, of all mortgaged properties were underwater, which was significantly below the peak of 26% observed in Q4 2009.
On average, said the CAR report, U.S. homeowners with mortgages gained $28,000 in equity last quarter compared to a year ago. California had the highest equity gain of all states in Q1 2024, with an average homeowner equity increase of $64,000 year-over-year in the latest quarter.
As Corelogic reported, California had a share of homes with negative equity at 0.7% in Q1 2024 and was the state with the smallest share among all states reported.
