Whether you’re refining your business model, mastering new technology, or finding a strategy to take advantage of the next market boom, Inman Connect New York prepares you to take a bold step. The next chapter is about to begin. Please join us. Join us and thousands of other real estate leaders from January 22-24, 2025.
Mortgage rates fell sharply and stocks of publicly traded financial and real estate companies rose on Wednesday as investors cheered an encouraging inflation report that seemed more likely to lead to further interest rate cuts from the U.S. Federal Reserve this year. .
A surprisingly strong jobs report on January 10 convinced investors that the Fed might not cut interest rates until June, and that central bank policymakers might have to resume raising rates. This caused a debate.
The Consumer Price Index rose 0.4% from November to December, in line with forecasters’ expectations, according to the latest numbers from the Bureau of Labor Statistics. But investors were pleasantly surprised that core inflation, which excludes volatile food and energy costs, rose just 0.2%.
“December’s relatively positive CPI report should dampen speculation that the Fed’s next move is to tighten policy,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a note to clients.
The CME FedWatch tool, which tracks futures markets to predict the probability of the Fed’s future moves, showed on Wednesday that investors are pricing in a 44% chance that the Fed will begin cutting rates again in May, and on Tuesday. This was up from 37%.
The yield on the 10-year Treasury note fell by as much as 15 basis points in Wednesday morning trading, indicating that mortgage rates also have room to fall. The 30-year fixed-rate mortgage rate fell 12 basis points to 7.13%, according to lender data tracked by Mortgage News Daily.
Stock prices for mortgage and real estate companies, which are sensitive to interest rates, were driven by Wednesday’s Consumer Price Index (CPI) readings and strong fourth-quarter earnings from major banks such as JPMorgan Chase, Wells Fargo, and Goldman Sachs. The price rose after receiving the report.
Shares of major mortgage companies such as UWM, Rocket and Loan Depot rose more than 4%, while publicly traded real estate giants RE/MAX, Anywhere Real Estate and eXp World Holdings also posted solid gains. Struggling iBuyers Offerpad Solutions and Opendoor Technologies each posted double-digit profits.
Interest rate relief for borrowers will be welcomed as an end to many prospective homebuyers and real estate agents. Investors in the bond market that funds most mortgages say the Federal Reserve has still not been able to rein in inflation since it hit a 2024 low of 6.03% on Sept. 17. Mortgage rates are rising by 1 percentage point as people worry about the outlook.
Starting with a 50 basis point cut on Sept. 18, the Fed cut short-term interest rates three times in the final months of 2024, lowering the effective federal funds rate from 5.33% to 4.33%.
Forecasters at Pantheon Macroeconomics expect the Fed to cut rates by a quarter of a percentage point at every other meeting in 2025, which would push short-term rates by an additional 1 percentage point in 2025. This will result in a decline. Investors in the futures market see it as lasting. On Wednesday, only 50% are pricing in the possibility that the Fed will raise short-term interest rates by more than 0.5 percentage points this year.
Mortgage interest rates rise from 2024 lows
The Fed does not tightly control long-term interest rates, and mortgage rates have been trending higher as economic data suggests progress in combating inflation is slowing. Bond market investors are also worried that President-elect Trump’s promised tariffs, tax cuts and mass deportations could reignite inflation.
Those concerns pushed 30-year fixed rate conforming mortgage rates this month above 7% for the first time since May 2024, according to rate lock data tracked by Optimal Blue.
Optimal Blue’s data, released on Tuesday with a one-day lag, shows that the average 30-year fixed rate conforming mortgage rate available to Fannie Mae and Freddie Mac is 7.05%.
Progress in the fight against stalled inflation
Since recording 2024’s lowest annual growth rate of 2.44% in September, the consumer price index (CPI) for all items has increased for three consecutive months, reaching 2.89% in December. Annual growth in core CPI, which excludes food and energy costs, was 3.25% in December, down slightly from 3.30% in November.
It is unclear how the Trump administration’s proposed policies will affect the future trajectory of inflation, but forecasters in the real estate and lending industry predict that the economy will continue to slow this year, with mortgage rates gradually rising to 6%. I predict that it will retreat towards the
samuel’s tomb
Toombs said demand for the product is likely to temporarily strengthen as consumers bring forward purchases of big-ticket items to avoid higher prices due to tariffs, but “a strong dollar, flat energy prices, hurricanes, Combined with the subsequent unwinding of replacement demand for cars, future demand will definitely increase.” Any further rise in the CPI core goods inflation rate will likely be modest. ”
Annual inflation, as measured by the Fed’s preferred inflation measure, the PCE price index, was 2.4% in November, close to the Fed’s 2% target and the post-pandemic high of 7.25 set in June 2022. % is much lower than that. PCE price index data for December will be released on January 31st.
Meanwhile, soaring mortgage rates have made many would-be sellers reluctant to put their homes on the market for fear of giving up the low interest rates on their existing loans.
The “lock-in effect” of mortgages has helped keep home prices rising in many markets, but national home price growth is expected to slow this year.
Optimal Blue’s latest data shows demand for purchase loans fell 13% from November to December and 23% from September. However, these numbers are not seasonally adjusted, and homebuyer demand for mortgages increased by 18% year-on-year.
Demand for housing loans in December increased compared to the previous year
Source: Optimal Blue Market Advantage Report, December 2024.
brennan o’connell
“December’s data shows how the market can adapt to changing conditions,” Optimal Blue’s Brennan O’Connell said in a statement. “While seasonal declines were expected, the year-over-year growth reflects resilience and increased demand for refinancing opportunities due to interest rate adjustments.”
Demand for conforming loans eligible for acquisition by Fannie Mae and Freddie Mac has neared historic lows in the past five months, dropping by 51% in December.
“This trend shows that borrowers are increasingly relying on government loans and nonconforming loans to obtain financing in a tough market,” O’Connell said.
Purchase loan applications rose a seasonally adjusted 27% last week compared to the previous week, but were down 2% from a year earlier, according to the Mortgage Bankers Association’s weekly survey of lenders.
The survey also included adjustments for the year-end and New Year holidays, and MBA deputy chief economist Joel Kang cautioned against reading too much into last week’s big gains.
Joel Kang
“This is a particularly volatile time for application numbers, so it may be more useful to focus on levels rather than rates of change,” Kang said in a statement. “Compared to a year ago, purchase applications are down 2 percent and refinances are up 22 percent.”
Mr Khan said mortgage rates had risen for the fifth consecutive week due to “concerns about the challenging inflation outlook and the fiscal deficit which remains too high”.
Get Inman’s Mortgage Overview Newsletter delivered straight to your inbox. Get the world’s biggest mortgage and closing news all in one place every Wednesday. Click here to subscribe.
Email Matt Carter
