Housing News

Buying a Home Could Be More Affordable This Summer as Mortgage Rates Dip

It may become a little more affordable to purchase a home this summer.

Mortgage rates dipped after new data showed that inflation cooled in May. That was despite the U.S. Federal Reserve’s decision to keep interest rates steady on the same day.

Rates dipped a little for 30-year, fixed-rate loans in June, according to Freddie Mac data. But they ticked up to an average 6.95% in the week ending July 3.

“Mortgage rates, which have remained higher for longer, will likely remain in the high sixes until later this year,” Bright MLS Chief Economist Lisa Sturtevant said in a statement. The multiple listing service covers the mid-Atlantic region of the country. “Increasingly, home sellers may have to do more negotiating to attract offers.” 

While mortgage rates are separate from the Fed’s short-term interest rates, the two often move in the same direction. That means mortgage rates are anticipated to remain high until the Fed is poised to cut rates.

Many homebuyers, as well as those hoping to refinance their loans, had been looking forward to lower rates this year.

The Fed was expected to lower rates three times this year. However, inflation has remained stubbornly higher than the Fed's 2% goal. It came in at 3.3% in May, down from a recent high of 9.1% in June 2022.

The result is that the Fed is now penciling in just one rate cut this year.

“Mortgage rates came down due to the inflation report, but surprisingly didn’t come back up after some Fed comments on one reduction in 2024,” said Jason Obradovich, chief investment officer at New American Funding.

The Mortgage Bankers Association expects mortgage rates will fall to about 6.5% by the end of the year. 

However, a silver lining exists for folks hoping to buy a home this summer. 

Elevated rates "will likely keep home prices pretty stable with a lower chance that prices will run up like they did in recent years," said Obradovich. 

When the Fed does cut rates and mortgage rates fall, the housing market could get a jolt. More buyers are expected to come off the sidelines and prices could rise as buyers compete over a still-limited supply of homes for sale. 

"The market will react very heavily to the first rate reduction," said Obradovich. "This is what the Fed is worried about, so they are going to wait as long as possible."