“Despite the cuts to the short-term interest rates by the Federal Reserve, mortgage rates have largely refused to budge,” Yun said. “One reason is that consumer price inflation has not been fully contained and slightly accelerated in the past two months.
“Lending money over the longer term needs to compensate for future returned money’s loss of purchasing power. More Fed-rate cuts are likely in 2025 because consumer prices should calm down measurably.”
Yun noted that apartment completions in the multifamily sector, thanks to last year’s high housing starts, could help ease rent pressures. Over time, this additional supply may narrow the gap between mortgage rates and affordability.
“The added supply will help cool rents. Therefore, the gap with the mortgage rates will not remain wide, which means mortgage rates will modestly trend lower,” he said. “Given that mortgage rates have stayed above 6% for more than two years, consumers are getting used to the new normal, especially considering that the 50-year average is 7.7%. Jobs and inventory will drive home sales.”
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