In the past few weeks, mortgage rates have dropped a lot because people think the Federal Reserve will soon lower interest rates.
The longer-term Treasury yields TMUBMUSD10Y have gone down by 3.843% because of this. At the same time, the interest rate on new 30-year fixed-rate mortgages has dropped to about 6.5%, which is the lowest level since May 2023.
Still, it hasn’t been enough to get people excited about buying homes. David Doyle and Chinara Azizova, two experts at Macquarie in North America, say that buying conditions are still “extremely stretched” when it comes to down payments and affordability.
The Macquarie team wrote in a Friday client note, “We don’t think prices will go down significantly without a lot of jobs being lost.” The main reason for the lack of affordable homes, they said, has been structural underbuilding for 15 years.
From a down-payment and mortgage payment point of view, the chart below shows how June and August were expected to compare previously.
The experts said that home prices are not likely to go up by a large amount because they are still too expensive for many people. “Lower mortgage rates are good news, but more homes on the market should lessen the effect they have on prices.”
In July, the jobless rate hit a three-year high of 4.3%. This set off the “Sahm rule,” a sign of a recession that scared investors.
Investors will be waiting for the August jobs report in the first week of September to get an update on the job market. This report should help them figure out when and how much the Fed will likely cut interest rates for the first time in four years.
