The federal funds rate remains unchanged since December, maintaining a low point amid a cooling labor market and inflation averaging below 3%. Market predictions show an 85% expectation for a 25-bps cut in September, with a possible benchmark rate of 3.75%-4% by the end of October. While mortgage rates have declined slightly over the past year, affordability remains an issue due to record home prices. Analysts express caution regarding construction activity, attributing it to still high mortgage rates despite lower overall rates.
Mortgage rates are just about 10 basis points lower than they were a year ago, but the median home price nationally hit a new record high in June.
Despite the recent gradual declines in rates, mortgage rates are too high to get things moving again in the construction industry.
When rates start to drop, they're not going to go down in a straight line. More data on jobs and inflation will be released before the Fed's next meeting and will ultimately determine the course of mortgage rates regardless of the wider policy rate.
If we continue to see weaker data, no matter what the Fed does, bond yields will continue to drop and mortgage rates will drop.
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