As the Federal Reserve began easing its monetary policies in September with a half-percentage point cut to the federal funds rate, the outlook for mortgage rates and affordability continued to improve.
The Fed signaled that additional cuts are expected, which could drive mortgage rates lower. If mortgage rates fall to 6% by the end of 2024, affordability could improve by 7% year over year, according to the report.
The RHPI, which measures affordability by adjusting house prices for purchasing power (based on income and mortgage rates), showed that the expectation of rate reductions has affected the bond market.
“The expectation of a rate reduction has already influenced the market, putting downward pressure on the 10-year Treasury bond yield and by loose association mortgage rates in recent months,” the report stated. “Now that the Fed has started easing and signaled a more aggressive easing trajectory, mortgage rates are likely to fall further later this year.”
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