home loan rates have risen slightly over the last week as the average rate on the 30-year fixed home loan ticked up to 6.78% Zillow Home Loans senior economist Orphe Divounguy joins Wealth! to discuss how high rates are weighing on buyers and if an debt charge rate cut from the Federal Reserve could alleviate issues for the US housing sector.
“People are very excited about the prospect of the Fed cutting debt charge rates, but I don’t think that normal rates will translate into lower home loan rates immediately as some expect. I think home loan rates are likely already reflecting Fed expectations,” Divounguy explains. “And if the Fed delivers fewer rate cuts or none at all, we’re likely going to see some upward pressure, not downward pressure on rates,”
He adds that with growing fiscal deficits, the pressure is not likely to soften anytime soon. Instead, he sees the rebalancing of the housing sector as a more encouraging sign for potential homebuyers.
“Existing home sales fell by 5% in the past month. But with home loan rates kind of where they’re at and the labor sector remaining somewhat on solid ground, you’re looking at potentially buyers turning to new construction,” Divounguy adds. Divounguy also points to homebuilders offering incentives to homebuyers, from rate buydowns and price cuts, as another factor influencing new home sales.
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