Morning Market Brief: February 22, 2024

US mortgage rates climb higher?

Data from the Mortgage Bankers Association of America (MBA) showed mortgage rates climbed higher, which helped drag down mortgage applications. Recent comments from the US Federal Reserve Board (Fed) suggest rate cuts might be pushed back to later in the year, which has kept bond yields relatively higher. This appears to be taking a bite out of real estate market activity, which has shown small signs of improvement in recent months.?

• MBA reported that mortgage applications in the US fell by 10.6% over the week ended February 16. This marked the second straight drop in mortgage applications, and the biggest decline since the end of 2023, suggesting demand is slowly pulling back.
• Over that same week, mortgage rates increased. MBA said the rate on a 30-year fixed-rate mortgage was 7.06%, up from the 6.87% rate in the previous week. This marked the highest rate since the week ended December 10, 2023.
• Mortgage rates had fallen substantially as expectations rose that the Fed would soon begin lowering its policy interest rate. However, the Fed held steady at its first meeting of 2024 and said rates are likely to be higher for longer amid still elevated inflation, suggesting rate cuts might come, but not until later in 2024.
• Existing home sales for January will be announced today. Sales of existing homes in the US have fallen in six of the past seven months. Relatively muted demand has been met with ultra-low inventory, weighing on overall activity.

As markets wait for the Fed to begin lowering interest rates, real estate market activity could be relatively choppy as purchasers adapt to quickly changing expectations for mortgage rates. Real estate, like most other markets, will go through cycles as economic conditions change, but it has proven to be a quality long-term investment, offering protection against inflation.

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