Mortgage rates

The Federal Reserve held interest rates steady for a third meeting and gave its clearest signal yet that its aggressive hiking campaign is finished by forecasting a series of cuts next year.

Recent economic data pushed investors toward Treasurys over the past week, driving 10-year yields to as low as 4.1%.

Heightened government-backed activity also helped bring the average loan size down to its lowest mark in 2023, with purchase amounts falling below $400,000 for the first time since January, the Mortgage Bankers Association found.

Only 62% of likely purchasers surveyed in October were waiting to act in expectations of declines, down from 85% in April.

The 30-year average declined for the fifth consecutive week, as purchase demand picking up at the same time, according to Freddie Mac.

Of the top five factors influencing a home buying decision, an Assurance IQ survey of real estate agents said price and affordability was at the top, followed by financing & mortgage options.

Even if the 30-year fixed were to slip further to 6.4%, it is not enough to end the seller's strike, economists said.

The market's reaction to the Consumer Price Index report on Tuesday helped to push the 10-year Treasury and 30-year fixed-rate loan lower, Freddie Mac said.

Applications to purchase newly constructed properties increased for the ninth consecutive month on an annual basis, as the inventory shortage for existing homes continues.

By the end of 2024 traders now see the U.S. central bank slashing rates by a full percentage point, despite officials repeatedly warning markets that they're in no rush to cut rates.

Broader economic factors, including growing household debt, are also likely to keep the housing market stagnant, Freddie Mac said.

But the Fannie Mae Home Purchase Sentiment Index still rose in October versus both September and the prior year.

The broader economy added 150,000 positions, a number the bond market initially read as likely to soften rates, but some economists interpreted differently.

Homebuilders and real estate investment trusts outperformed the broader market as investor appetite shifts toward more defensive, cash-producing sectors.

Freddie Mac's survey finds the 30-year fixed loan dropped 3 basis points, but Zillow's tracker showed since the FOMC announcement, they dropped 30 basis points.

For the first time in about 15 months, more new listings came on the market in August on a year-over-year basis, Redfin said.

At the same time, the 15-year fixed rate loan rose above 7% for the first time in nearly 23 years, Freddie Mac reported.

The Fed's higher for longer statements have pushed up the 10-year Treasury in recent weeks to levels last seen in 2007 and that is affecting pricing.

But the industry will still have to go through some pain in 2024, Wharton Professor Susan Wachter told attendees at the Mortgage Bankers Association annual convention.

While great progress has been made towards the goal of reducing capacity by 30%, job reductions should continue for several more quarters.