Freddie Mac’s comprehensive mortgage market forecast provides valuable insights into the current state of the housing market, including mortgage rates, home sales, and consumer behavior. Despite recent declines in mortgage rates, housing demand remains sluggish, leading to cautious behavior among potential homebuyers and impacting the overall market dynamics.
According to Freddie Mac’s Mortgage Market Forecast for August 2024, key takeaways include the average rate on a 30-year fixed mortgage standing at 6.85% in July. Additionally, low refinancing activity was observed in Q2 2024, with a refinance volume dropping to $62 billion, the lowest since 1996. The homeownership rate also decreased to 65.6% in Q2 2024, reflecting a decline from the previous year. An increase in rental units by 0.8 million units over the year highlights a shift towards renting over buying. Future predictions by Freddie Mac suggest a modest increase in home prices over the next two years, with an approximate 2.1% increase in 2024 and a 0.6% increase in 2025.
The current overview of the mortgage market reveals that despite a slight decrease in mortgage rates, housing demand has not rebounded as expected. Many potential homebuyers are waiting for further rate declines, leading to deferred decisions and supply constraints in the market. Refinancing activity has also significantly declined, with homeowners choosing to retain their existing mortgages due to the lock-in effect of lower rates.
Homeownership trends show a decrease in the homeownership rate in the U.S., with more individuals opting to rent rather than buy. The increase in renter-occupied units compared to owner-occupied units highlights affordability concerns driving this trend. Looking ahead, Freddie Mac forecasts a modest increase in housing demand, with gradual improvements in buyer sentiment and affordability expected to drive this growth.
Lower mortgage rates are anticipated to have a positive impact on first-time homebuyers, potentially increasing their participation in the market. However, limited inventory due to a decade of underbuilding may continue to pose challenges for buyers even with lower rates. In conclusion, while there are hopeful signs of growth in homeownership and home values, challenges persist in the housing market that buyers should carefully consider when navigating their real estate decisions. Stay informed and vigilant in the evolving market landscape to seize opportunities that may arise.