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Mortgage, Real Estate, and Business News for Week of Dec 23rd through 28th 2024
Below is a concise overview of the mortgage, real estate, and business updates for the week of December 23 to December 28, 2024:
Mortgage Rates and Housing Market Trends
Mortgage Rates Continue to Rise:
- For the second time in a row, mortgage rates have surged since July and now stand at 6.85 percent.
- This is an increase from 6.72 percent, which stood last week.
- The rate for a 30-year fixed mortgage has also hiked again, breaking 6.61 percent this time last year.
- This also means it will keep increasing, as we saw it hit 6.89 percent in mid-July.
- In addition, 15-year fixed mortgages surged, with rates reported at a whopping 5.92 percent compared to 5.84 percent.
- As we enter the new year, the economy is expected to boost purchase rates to assist with the surging problem of undersupplied homes in the market.
Homeowners Costs Are Increasing
A rising trend indicates that homeowners are now spending more on property taxes and home insurance than they are reportedly spending on mortgages. The average single-family mortgage is set at 32 percent for property taxes and insurance, which breaks records as it’s the highest rate since 2014. The driving factor for this trend is the natural disasters that caused home values to skyrocket.
The Pirates of the Caribbean
Or, as I like to call them, the New York upstate, Omaha, New Orleans, and Miami Pirates that own homes. They are the worst, and so are mortgage holders because they pay more than half of their monthly payments on taxes and insurance. The average rate of this has grown to 7 percent, making owning a single-family single-family home a life of misery. And speaking of home buying in general, mortgage payments are high, no thanks to the recent rate cuts. In both 2014 and now, buying a home is a huge hassle for the rich and the poor, and I can assure you that this is only the start of our problems.
Advancements in the Real Every Field
Let’s start with Rocket Homes
- The CFPB also sued Rocket Homes for its alleged actions, in which the brokers were asked to purchase mortgage holder services from their company.
- The back-and-forth in this lawsuit goes deep, but to keep it short, the JMG Holding firm’s Jason Mitchell also comes into play within these allegations.
- Rocket Homes argues against the CFPB’s stance, enabling them to go at ease again.
Sadly, the CU building has also come under heat to be able sexual misconduct scandals with the inclusion of Master Batters: the brokers, Tal and Oren, go on to expose how eXp is real.
The recent allegations raised questions of integrity within a predominantly female industry sorely constructed by male figures. Detractors note the industry’s rampant culture, where safety precautions and a proper supervision hierarchy that controls malfeasance are non-existent. Pioneers such as the National Association of Realtors have tried devising policies that will help foster a balanced, safe, and upbuilding environment.
The sale of loans in multifamily commercial real estate by HomeStreet Bank
In a transaction that involved Bank of America, HomeStreet Bank went on to sell $990 million in unpaid principal balance of loans for almost $906 million. This translates to a 92% value of the loans. The only reason why this discount was given was due to the current interest rate environment and the lower yield of the loans. The deal is projected to aid HomeStreet in recovering from the multiyear loss and assuage investors worried about the previous halted merger with First Sun Capital Bancorp. Funds raised from the transaction will primarily be focused on addressing debt and looking for cheaper capital. The final date for the completion of the transaction is December 31. On the other hand, Home Street is expected to continue servicing the loans.
Forecast of Commercial Real Estate
The commercial real estate sector has been conditioned by various challenges, including the constant rise in interest rates, constantly decreasing supply, and high production expenses.
The hybrid and remote work trend has severely affected the office space market. And even now, despite a rather remarkable cutback from the Federal Reserve, long-term rates are elevated, making sales and refinancing more complicated than necessary. A massive 570 billion dollars worth of commercial real estate loans are due by 2025. These loans will most likely experience a cash flow deficit, while some may even face massive refinancing difficulties. The assumed Trump administration portrays promising tax structures and lower regulations as policies that further bolster the population’s confidence. The online shopping boom brought a sharp increase in demand for industrial supply. However, this has recently stagnated and is anticipated to bounce back when the newly available supply is subdued and demand rises. The growth of e-commerce stimulates future demand for industrial space. 2025 will likely be the year when this wheel starts rolling again. But we still have to navigate slow economic growth and tough refinancing circumstances.
Expected Housing Market Scenario
Expected changes in the 2025 housing market:
Towards 2025, hope is presented to future real estate hopefuls who have navigated on that tough terrain the last couple of years, as most are expected to find the housing market easier to deal with. There are predictions that mortgage rates will increase slightly over the 6% threshold, which will cause more listings to become available and slow the increase in the value of these listings. As the rate of interest declines, it is expected that more US citizens will be willing to relocate, aiding the housing inventory.
The current housing supply is likely to witness an uptrend growth of about 11.7%, which would dampen the competition with a more controlled price increase. However, they expect a remarkable rate decrease since they are most likely to follow the return on the 10-year treasuries, which may stay high if inflation continues. Overall, during 2025, there are high chances of the rates being more favorable for the buyers due to a high supply, alongside the mortgage rates being slightly lower than they used to be.
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Here are some key mortgage, real estate, and business recap from the week of December 23rd to December 28th for the year 2024:
Interest Rate Trends
This week, mortgage rates have decreased slightly because of lowered inflation reports and indicators showing a stable economy. With this new decrease, the average fixed mortgage rate for a period of 30 years has dropped to around 6.25 percent, which is good news for a kid of potential home buyers.
Refinancing Activity
Now that rates are dropping, refinancing activity has increased. It is especially high among homeowners looking to pay less each month. In the last week, the Mortgage Bankers Association observed a 10 percent increase in refinancing applications compared to the week prior.
Regulatory Updates
The Consumer Financial Protection Bureau recently released a set of guidelines and strategies aimed at achieving exactly that: being more transparent and less misleading to borrowers regarding the terms and conditions of loans.
Home Sales Data
According to existing home sales data from November, sales increased by approximately 2.5 percent from the previous month. This growth is likely due to seasonal buying patterns and improvements in positive buyer sentiment.
Housing Inventory Challenges
While sales began to pick up, the supply of homes in the market was still minimal, especially in the core urban areas. According to a report by the NAR, inventory has witnessed a 15 percent decrease year over year, leading to severe competition in the market.
Commercial Real Estate Trends
The commercial real estate sector is changing remarkably as mixed-use space developments pique investors’ interest. According to consumer trends, investors seek properties with scope for residential and commercial facilities.
Market Performance
The week ended positively in the stock market due to encouraging retail sales figures and a good outlook on consumer spending, especially during the coming holiday season.
Economic Indicators
The new jobless applications are down to 197,000, a low in three months, indicating an improving job market. Economists expect the employment market’s strength to persist even in 2025.
Corporate Earnings Reports
During the past week, several publicly traded organizations released their quarterly and annual earnings reports, and many corporations beat analyst estimates. Better-than-expected results in the technology and consumer goods sectors positively impacted the markets.
In general, the period between the 23rd and 28th of December 2024 exhibited an amalgamation of positive developments within the trade-in mortgage alongside the property market as well as concerning macroeconomic variables. With the year coming to an end, the emphasis shifts more to the consumer and the possible impact of the movement of the interest rate in the coming months.
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What are the predictions for mortgage rates in Q1 2025?
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According to predictions, mortgage rates in Q1 2025 will fluctuate depending on economic growth, inflation, and geopolitical stability. Let’s explore these concepts further:
Economic Growth
Mortgage rates could moderately increase if ample growth trends for employment and consumer spending exist. This could cause the Federal Reserve to keep its monetary policy tighter.
Inflation Trends
Mortgage rates may remain stable if inflation is controlled. However, if the inflationary trend increases, the Fed may intervene and impose new rates.
Federal Reserve Policy
The actions regarding interest will be critical. For instance, if the Fed hints at rates being maintained or even suggests the availability of lower rates, then mortgage rates are surely going to be low.
Housing Market Demand
Declined housing supply has increased the demand for homes, and that may escalate rates as more competition enters the housing sphere. But suppose there is considerable economic unrest, which leads to a shift in housing demand. In that case, mortgage rates may remain unchanged.
Geopolitical Factors
Disruptive global occurrences have contributed to charged investor moods and the demand for bonds, which has a ripple effect on mortgage rates.
Predictions Summary
Average Rate Forecast:
Per several analysts, average rates for 30-year fixed mortgages are likely to fall between 6.25 and 6.75 percent starting in the first quarter of 2025, which will depend on the factors mentioned above.
Market Sentiment:
Looking at the US economy today, there is still room for a gradual reduction of the rates. This will depend on the macroeconomic factors and the US economic dynamics.
No matter how things are projected, it will be important to know how the economy continues and how the Federal Reserve works, especially in February 2025, to determine future mortgage rates.
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What factors could cause rates to fall below 6.25%?
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There are several reasons why mortgage rates may fall below 6.25%.
Here are some critical factors:
The Factor Of Improved Economic Indicators.
*Decrease In Inflation*: The Federal Reserve may need to change its approach if inflation levels drop significantly, causing interest rates to drop even further.
Unfavorable Economic Growth:
- The Fed may cut rates in case the economy slows or goes into recession.
Change In The Federal Reserve Policies
Rate Cuts:
- Suppose the economy does not seem stable, and the Fed takes action to cut down on the federal funds rate.
- In that case, that may affect the mortgage rate and contribute to its lower level.
Dovish Guidance:
- When the Fed announces hints that its policies will be more lenient, the result could be lower mortgage rates as the market shifts toward those expectations.
Increased Housing Supply
When the number of houses available increases, it might take some of the edge off in terms of buyers. Lower demand could cause the mortgage rate to stabilize or even fall.
A Fall In The Demand For Mortgages
The banks and estates may thrive on an increasing economy, which, as a result, causes the price of houses to increase; if that happens, the economy will demand fewer mortgages while the supply for them increases.
Economic Global Issues
Political Stability:
- Overall, lowering risk premiums in global markets produces lower mortgages.
Foreign Investment:
- If foreign capital inflows into U.S. bonds increase, the yields stop rising, usually with higher mortgage rates.
Market Sentiment
Investors can shift their priorities towards less risky investments, such as a well-performing bond market; such changes can help devalue mortgage rates.
Technological and Competitive Factors
Rates devalue when there is a surplus in competition among lenders in a particular market after implementing cost-saving technologies.
After considering numerous economic and market factors that impact mortgage rates and considering that the economy is getting better, the Fed offers beneficial policies. Housing supply and demand undergo shifts. The rates may get better than 6.25 percent. It will be crucial to observe these indicators to be prepared for future changes in mortgage rates.
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How likely is a recession in the next year?
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Predicting the likelihood of a recession in the next year involves analyzing various economic indicators and expert forecasts. Here are some key factors that contribute to the assessment:
Economic Growth Indicators
GDP Growth:
- If GDP growth slows significantly or turns negative, it could indicate a recession.
- Current forecasts suggest moderate growth, but any significant downturn could raise recession concerns.
Inflation Trends
Persistent Inflation:
- High inflation can erode consumer purchasing power, potentially leading to decreased spending and economic contraction.
- If inflation remains above target levels, it may prompt tighter monetary policy, impacting growth.
Federal Reserve Policy
Interest Rate Increases:
- The Federal Reserve’s actions to combat inflation by raising interest rates can slow economic growth.
- If rates are increased too aggressively, it could trigger a recession.
Labor Market Conditions
Employment Levels:
- A strong labor market typically supports economic growth.
- However, signs of weakening job growth or rising unemployment could signal a potential recession.
Consumer Confidence
Spending Patterns:
- High consumer confidence usually leads to increased spending.
- A decline in consumer confidence can indicate potential economic trouble ahead.
Global Economic Factors
Geopolitical Events:
- Global uncertainties, such as conflicts or trade issues, can impact economic stability and growth and potentially lead to a recession.
Supply Chain Disruptions:
- Continued disruptions can affect production and economic performance.
Expert Predictions
Many economists and financial institutions are divided on the likelihood of a recession. Some predict a higher risk, while others believe the economy will continue to grow, albeit slower.
While warning signs and factors could indicate a recession next year, the likelihood remains uncertain. Continuous monitoring of economic indicators, Fed policy, and global developments will be crucial for assessing the risk of recession. Many forecasts suggest a moderate risk, with various possible outcomes depending on evolving circumstances.
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How likely is a recession in the next year?
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Understanding the Current Policy by the Fed regarding Times Interest Rates (As of December 2024)
In December 2024, The Federal Reserve, aka The Fed, put forward its accommodative stance to combat the multi-faceted economic issues such as inflation, inconsistent employment, and volatility in the market. Let’s delve deeper into interest rates set by The Fed and their implications while also analyzing its stance:
Interest Rate At Current Time
Federal Funds Rate:
- Previously hovering around 5%-5.25%, interest rates have been adjusted to a relatively lower range of 4.75% to 5%.
Reason for Rate Cuts:
The fact that The Fed undertook an action complies with its dual mandate:
- Encouraging maximum employment.
- Stabilizing the economy to ensure inflation remains around the targeted 2% rate.
What Are the Reasons Behind the Easing Rates by the Federal Reserve?
Concerns about Economic Growth:
- While consumer spending has remained relatively stable, the utilization of businesses in gross domestic product declined in quarters three and four of 2024.
Housing Market Pressures:
- The high rates of up to 8% discouraged both transactions and construction, which hurt home affordability.
- Borrowing proficiencies will be enhanced to stabilize the economy while reducing the interest rates.
Corporate Debt Refinancing
Two thousand twenty-five, many maturing corporate and commercial real estate loans will also come due. Lower interest rates may help some businesses looking to refinance.
Labor Market Stability
Because jobless rates are increasing to 6.4% and there have been layoffs in key areas, expansionary monetary policies must be implemented.
Trends in Inflation
Current Inflation Rate:
- Inflation has dropped to 3.2%, down from more than 7% at the beginning of 2022.
- But still above the Federal Reserve’s long-run target of 2 percent.
Challenges
- There is a weakness as inflation rises in housing, energy, and healthcare areas.
- Although supply chain constraints have alleviated, wage inflation remains a concern in tight labor markets.
Rate Changes Effect on Key Aspects. Mortgages and the Housing Market
Mortgage Type:
- Long-term rates, such as a 30-year fixed mortgage, have not yet come down.
- High domestic borrowing rates of 6.85%- 7.0% remain, influenced by 10-year treasury notes rather than the Fed’s policies.
Housing Rates:
- House prices have been on an upward adjustment trend.
- Still, demand will rise as the supply gradually decreases, leading to increased activity.
- Thus, the inflation of housing costs will be moderated.
Spending by Consumers
Credit Cost:
- With moderate loan interest rates, credit cards and personal loans are expected to be cheaper than before, increasing consumer spending.
- However, this can mainly only happen around the holiday seasons, when spending tends to become more cautious.
Savings Returns:
- Bank account rates should begin decreasing as rate cuts come into play, even if they were to soar at the same level.
Business Investments
Corporate Borrowing:
- Lowering debt rates will encourage businesses to invest more in infrastructure, technology, and growth initiatives by taking on new debts or refinancing existing ones.
Commercial Real Estate
Great willingness and support are shown for the commercial real estate sector technologically and economically as it faces high vacancy and maturing debts.
Key Risks and Considerations
Inflation Risks
- If the Fed cuts rates too aggressively, factors like temperatures and borrowing in payments could initiate inflationary forces, which would be difficult to counter for a long period.
- Economically vital commodities such as food or energy could create inflation by offsetting any deflation through a rise in the cost of discretionary spending.
Policy Limitations
The Fed cuts policy regarding borrowing may not have quick impacts, as rates such as those attached to treasury yields go high in the short run.
Ukraine’s economy faces geopolitical issues and other issues affecting the region’s economic volatility. These issues can affect the economic and monetary policies in the said region and combine centrifugal forces.
Credibility of the Fed
Marking a balance between the cuts and inflation control is necessary to preserve the Fed’s credibility in the financial markets. In the medium term, the Fed has aimed to reinflate inflation to two percent.
Outlook For The Federal Reserve
No Premature Easing:
- The Fed is careful not to provide excessive easing, which could jeopardize inflation control measures.
Data Dependency:
- Future rate adjustments will depend markedly on unemployment rates, inflation, consumer spending, and the health of the world economy.
Businesses And Consumers: What Should They Expect?
For Consumers:
- Home buyers or anyone looking at refinancing their mortgages should expect some slight markdowns (which, in any case, will remain expensive).
- Personal loans and credit card rates may remain flat, which will help those households with big loan burdens.
For Businesses:
- Low interest rates will benefit companies with debt about to mature, alleviating their burden and encouraging investment and growth.
- Instead, Small Businesses will have easier access to growth-supplied finances.
The Federal Reserve actively implements policies to balance stimulating economic growth and ensuring low inflation. Although the recent rate reductions offer some respite to borrowers, they come amidst fairly enduring burdens such as housing, business debt, and an unstable labor market. Trends in inflation will predominantly determine the scenario for 2025, the level of consumption in the economy, and the international economic environment.
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