Powell
was
referring
to
the
current
situation
in
which
homeowners
holding
historically
low
rate
mortgages
aren’t
feeling
incentivized
to
sell
their
homes,
reducing
the
number
of
properties
available
in
the
market.

A


Federal
Housing
Finance
Agency

research
paper
published
in
March
2024
shows
that
nearly
all
50
million
active
mortgages
have
fixed
rates,
and
most
have
interest
rates
far
below
prevailing
market
rates,
creating
a
disincentive
to
sell.

The
paper
suggests
that
a
homeowner
with
a
4%
mortgage
rate
—
closer
to
the
pandemic-era
levels
of
2%
to
4%
—
is
more
than
50%
less
likely
to
sell
with
mortgage
rates
at
7%
than
if
they
were
at
4%.

Also
on
Wednesday,
as
expected,
the
Fed

maintained
its
short-term
policy
interest
rate
between
5.25%
and
5.5%.
It
also
released
estimates
showing
that
most
of
its
officials
forecast
only
one
rate
cut
this
year,
compared
to
a
majority
who
were
planning
for
a
total
of
three
cuts
in
March.
That’s
despite
the
lowest
annual

inflation
report
since
early
2021.

“The
Fed
is
wrangling
with
tenacious
inflation.
The
consumer
price
index
for
May
was
lower
than
expected,
but
the
Fed
won’t
claim
success
until
inflation
has
improved
several
months
in
a
row,”
Holden
Lewis,
a
home
and
mortgage
expert
at

NerdWallet,
said
in
a
statement.

According
to
Lewis,
mortgage
rates
dropped
slightly
last
week,
but
the
decline
doesn’t
imply
a
long-term
trend.
In
his
opinion,
“mortgage
rates
are
likely
to
remain
stubbornly
above
6.5%
for
the
rest
of
2024.”

Fed
officials
not
only
reduced
the
number
of
projected
rate
cuts
this
year
from
three
to
one
but
also
increased
their
year-end
rate
estimate.
The
median
federal
funds
rate
at
the
end
of
2024
is
expected
to
be
5.1%,
compared
to
4.6%
in
March.
For
2025,
projections
went
from
3.9%
in
March
to
4.1%
in
June.

It
means
that
“once
it
starts,
this
cutting
cycle
is
likely
to
be
shorter
than
past
cycles,”
according
to

Mortgage
Bankers
Association
(MBA)
chief
economist
Mike
Fratantoni.

Wednesday’s
announcement,
however,
did
not
change
the
MBA’s
forecast
that
mortgage
rates
will
drop
to
about
6.5%
by
the
end
of
2024.

Freddie
Mac’s
latest
index,
released
on
Thursday,
shows
that
30-year
fixed
mortgages
are
averaging
6.95%.
The
conforming
loan
rate
was
7.15%
at


HousingWire’s
Mortgage
Rates
Center.

“Mortgage
rate
trends
aren’t
likely
to
bust
the
mortgage
rate
inventory
lock-in
effect
until
at
least
the
end
of
the
year,
and
possibly
well
into
2025,
as
the
Fed
holds
fast
on
fighting
inflation,”

Realtor.com
senior
economist
Ralph
McLaughlin
said
in
a
statement.

According
to
McLaughlin,
the
10-year
yield
has
to
drop
by
150
to
200
basis
points
for
homeowners
to
feel
comfortable
selling
and
buying
another
home.

“At
current
spreads,
this
could
require
3-4
quarter-point
rate
cuts
by
the
Fed,”
McLaughlin
said.
“As
of
now,
the
market
is
pricing
in
just
one
cut
by
the
end
of
the
year
and
2-3
cuts
in
2025.
As
such,
anyone
hoping
the
lock-in
effect
will
be
busted
this
year
may
be
sorely
disappointed.”

Housing
industry
experts
believe
that
deals
are
being
made
by
sellers
and
buyers
who
face
life
events
—
such
as
people
divorcing
or
retiring,
moving
to
another
state
for
work
or
forming
families.

Chuckie
Reddy,
partner
and
head
of
growth
investments
at

QED
Investors,
a
fintech
venture
capital
firm
with
more
than
$5
billion
under
management,
said
that
as
relief
in
mortgage
rates
is
delayed,
“we
are
starting
to
see
some
signs
of
inventory
build,
which
may
lead
to
some
price
reductions.”

“We’re
really
starting
to
see
for
the
first
time
some
data
showing
that
buyers
are
a
little
bit
exhausted
and
that
sellers
are
coming
to
the
market,
setting
up
the
scenario
where
we
could
return
to
market
equilibrium
with
housing
price
cuts
and
softness
in
house
prices,”
Reddy
said
in
a
statement.