Mortgage & Housing Update 10/25/2024

Mortgage & Housing Update 10/25/2024

It's been a cruel October for buyers, with average 30-yr mortgage rates spiking on job market strength, stubborn inflation, and fast-rising US debt levels. Looking on the bright side, however, inventory levels continue to rise and competition levels are falling.

A cruel October

Average 30-yr mortgage rates jumped 75 basis points (0.75%) over the last month and are approaching 7% again. All this despite the Fed cutting rates by 50 basis points (0.50%) on September 18. The much stronger than expected September jobs report started the sell-off in bond prices, and the latest inflation report added fuel. But lately the concerns have focused on the US's rising debt levels. 

Why Have Mortgage Rates Rebounded?

Since the Fed cut rates in mid-September, average 30-yr mortgage rates have moved UP from 6.11% to 6.92%. Why? That’s the question everyone is asking. Here are 4 responses, which in some combination could help to explain this unwelcome move:

  • “Typical” post Fed rate cut moves. As conflicting as it sounds, it’s fairly common for treasury bond prices to fall (and mortgage rates to rise) immediately after the Fed initiates a rate cut cycle. It’s a ‘buy on rumor, sell on fact’ phenomenon. In this case, the market had already priced in multiple, large rate cuts before year-end.
  • Unsupportive data since the Fed cut.The September BLS jobs report that came out on 10/4 was a blowout: +254K jobs added, unemployment rate 4.2% → 4.1%. And then the latest inflation report saw “core” CPI rise from +3.2% YoY in August to 3.3% YoY in September. Would the Fed have cut rates 50 bps if they knew this report was coming?
  • The October Effect. Historically, October has been a bad month for financial markets. The 1929 stock market crash and Black Monday in 1987 both happened in October. And in each of the last 3 years, bond prices have gotten hit hard in October. Recall that in October 2023, average 30-year mortgage rates peaked at 8.07%.
  • Election-related Fears. Who will increase the annual deficit and federal debt most? Neither candidate is addressing this. Sadly, advocating for a balanced budget is not popular to voters. Would a Trump victory stoke inflation, or a Harris win push our national debt ($35 trillion = 125% of GDP) even higher?

Existing home sales are “stuck” at low levels.

Despite declining mortgage rates in the preceding 4 months, existing home sales in September failed to revive, falling 1% month-over-month to a seasonally-adjusted, annualized rate of 3.8 million units sold. This pace of sales is actually BELOW what it was in 2008 - when transaction volumes bottomed after the housing crash.

Median sales prices slip. The median sales price for existing homes in September fell 2.3% MoM to $404,500. But that was still UP year-over-year by 3.0%. The Northeast saw the strongest price growth (+6% YoY), and the South the weakest (+0.8% YoY). [NAR]

Less competition, Market cooling

Competition always wanes in the fall and winter, but the September 2024 Realtors Confidence Index showed that homes were seeing fewer multiple bidders and a slower pace of sales compared to the same time last year. There are fewer people competing for properties, only 20% of homes sold above their listing price, and homes are lingering on the market longer. This is more than just seasonal.[NAR]

Average Number of Offers Received per Sale: The average home sold in September 2024 had 2.4 offers. That was the same as in August 2024, but was down slightly from 2.6 in June 2023. 

% of Homes Sold Above List Price: 20% of the homes sold in September 2024 transacted above their initial listing price.  Same as in August 2024, but down from 26% in September 2023. The market is getting back to “normal” — where sales prices on average are 95–100% of the listing price.

Days on Market: The typical home sold in September 2024 had been on the market for 28 days. That was up slightly from 26 in August 2024, and up significantly from 21 in September 2023. Keep in mind that a higher number indicates a slower pace of sales. 

Thanks for tuning in to my Mortgage & Housing Update. [source: List Reports] My name is Pauline Lee. I am a real estate professional, with an expertise in financing. Connect with me for a consultation and to get mortgage ready. I encourage you to get pre-approved.

Pauline Lee | (617) 965-1988 x205 | pauline@indmortgage.com 


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