Mortgage rates lowered this week following a ceasefire agreement with Iran, a trend economists say may be more promising in light of a signed agreement by President Trump.
The average 30-year fixed mortgage rate decreased to 6.47% from 6.52% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
“The previous weeks have been filled with constant back-and-forths, showing progress toward a resolution, only to be followed by heightened military action,” said Realtor.com Senior Economist Anthony Smith. “However, the latest rounds have proven more promising than previous periods of reprieve, as a tentative deal has now been drafted and now signed by President Trump.”
Smith also pointed to the newly-seated Fed Chairman Kevin Warsh joining a unanimous 12-0 vote this week to hold the federal funds rate unchanged in a range of 3.5 to 3.75 percent, where it has stood since December, as an expected outcome, but commented his notably different leadership approach from former Chairman Jerome Powell could potentially slow a rate decline.
“Warsh used his first decision as chair to signal a broader regime change: the easing bias is gone, forward guidance has been shelved, and the committee’s statement was rewritten around a single, unhedged commitment to delivering price stability,” Smith said. “Markets responded with a jump in the 10-year Treasury and rising odds of a rate hike before year’s end.
“The logic of Warsh’s approach, earning credibility by following through rather than telegraphing, is sound and ultimately the path to lower long-term rates,” Smith added. “But a market without clear guidance may demand a premium in the near term, which could keep mortgage rates from falling as quickly as the Iran ceasefire alone might suggest.”
Smith said for buyers, the spring market has shown more resilience than the rate environment might suggest. According to Realtor.com, contract signings climbed 3.8% in May as sellers adjusted prices to attract demand and buyers responded. Listing prices have now fallen year over year for seven consecutive months, and inventory remains above last year’s levels, Smith noted. “A lasting resolution to the conflict would help bring mortgage rates down, boost consumer confidence, and housing market momentum heading into summer, however, the path will likely be rocky,” he said.
Freddie Mac Chief Economist Sam Khater also commented on consumer homebuying trends.
“Incoming data continues to reflect a resilient consumer, with retail sales improving and pending home sales strengthening, suggesting purchase demand is continuing to modestly improve,” he said.
See the full report here.
