Mortgages Headed Below 6%, HAR Told

HOUSTON – (Realty News Report) – Lower mortgage rates are coming to the housing market next year, says Selma Hepp, chief economist for CoreLogic.

Homebuyer interest has ticked up slightly since the Federal Reserve cut rates in September, Hepp told the Engage Conference presented last week by the Houston Association of Realtors.

But many would-be buyers are fence sitters, waiting for even lower mortgage rates, Hepp said.

“Buyers hear from people like me and all the other economists that mortgages rates are going to be lower down the road. So they are waiting. They are sitting one sidelines,” Hepp said. “Yes, the lower rates right now are helping the optimism. But a majority of them are still on the sidelines.”

The Freddie Mac mortgage survey said 30-year mortgages averaged 6.44 percent last week, down from 7.63 percent a year ago.

Hepp told HAR that 30-year mortgages should break the 6% threshold in 2025 and end the year around 5.7 percent.

Economic data will show a softer labor picture next year, setting the stage for rate cuts by the Federal Reserve, Hepp said.

“There are signs of slowing in the economy, especially in the labor market, which I good because it lines up with was the Fed needs for us to see better inflation number,” she said. “Momentum is building. We do think 2025 and the years after are going to be better.”

An emerging threat to affordability is rising property insurance premiums, Hepp noted. In Florida, some home owners, particularly retirees on a fixed income are moving because insurance is extremely expensive.

As home owners are motivated to move because of insurance cost, the inventory of homes for sale has grown.

In Houston, the supply of homes for sale has been increasing. The months of inventory of single-family homes expanded from a 3.4-months supply last September to 4.4 months, which is the highest since September 2012 when there was a 4.7-months supply, HAR reported. Housing inventory nationally stands at a 4.2-months supply, according to the latest report from the National Association of Realtors.

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