June 2024 Market Insight
Where did rates end in the month of June?
30 Year Fixed Rate Conventional Average: 7.399% (0.172% decrease month over month)
30 Year Fixed Rate FHA Average: 7.108% (0.317% decrease month over month)
30 Year Fixed Rate VA Average: 7.382% (0.076% decrease month over month)
Disclaimer: The mortgage rates provided are sourced from a database reflecting lenders’ current pricing and fees for informational purposes only, not as an offer or commitment to lend. Rates are subject to change and may not apply to all borrowers. This information does not constitute financial or legal advice. Conventional rates are based on a $400,000 loan amount with 20% down payment and 740-759 credit score. FHA & VA rates are based on a $300,000 loan amount with 5% down and 740-759 credit score.
What Happened This Month in the Mortgage and Real Estate Space?
Economic indicators have had a significant impact on the real estate and mortgage sectors this month. Here’s a simplified overview of the key points:
Unemployment Rate: As of June 25, 2024, the US unemployment rate was 4.0%. This marks the first time in over two years that the rate has hit 4% or higher. While a higher unemployment rate can be tough for families, it does help reduce inflation since fewer people have money to spend. This rate is still lower than the long-term average of 5.69%.
Consumer Spending: The annual growth in the PCE price index slightly decreased to 2.6%, while the Fed's preferred core PCE price index also dropped to 2.6%. Despite these decreases, personal spending increased by 0.2% month-over-month, indicating that people are still spending money. For interest rates to decrease, we need to see data showing a significant reduction in consumer spending, which signals to the Federal Reserve that higher rates are effectively slowing the economy.
Consumer Debt: As of June 2024, total household debt in the United States reached an all-time high of $17.3 trillion, up by $184 billion (1.1%) from the first quarter of 2024. Credit card debt saw the largest increase, rising by 16.6% between Q3 2022 and Q3 2023. The average American's credit card debt was $6,218 in Q1 2024, up from $5,733 in Q1 2023, with an average interest rate of 22.63% on accounts with balances that assessed interest.
Interest Rates: Federal Reserve Chairman Jerome Powell announced on June 1, 2024, that there would be no more rate hikes. This initially helped the market, causing rates to drop for nearly two weeks before they started rising again later in the month. Elevated interest rates, driven by strong economic indicators, have a significant impact on borrowing and spending behaviors.
Inflation: According to the IMF, inflation is on track to reach its 2% target due to the Federal Reserve's actions. In May, the Consumer Price Index (CPI) was steady, with the headline flat and the core index rising only 0.2% month-over-month. The Producer Price Index (PPI) also fell by 0.2% over the month.
Job Creation: In May, job creation exceeded economists' expectations with 272,000 jobs added, mainly in healthcare, leisure and hospitality, and government sectors. However, the unemployment rate increased to 4%, the first time it has been this high since January 2022.
Global GDP: S&P Global forecasts that global real GDP growth in 2024 will be 2.7%, with higher growth revisions for some countries, including the US and China, due to policy stimulus.
Important Dates for Upcoming Economic Data
Federal Reserve Chairman Jerome Powell Speaks on 07/02
Unemployment Data comes out every week
Consumer Price Index (CPI) will be released on 07/11
Producer Price Index (PPI) and inflation expectations will be released 07/12
Federal Reserve Interest Rate Decision will be on 07/31
Let's Talk About Mortgage Rate Forecasts
My Take on It: While mortgage rate forecasts are important, it’s crucial to take them with a grain of salt. In 2020, no one predicted rates would drop to 2.5-3% due to the pandemic. The Federal Reserve lowered the federal funds rate to 0% to stimulate the economy, making borrowing money cheaper than ever. Similarly, in 2022, forecasts underestimated the rate increase, which soared to 7.08% in October, far higher than the predicted 3.875%.
My point is, don't rely solely on these forecasts. It’s important to do your own research. If you’re buying a home and relying on rates to come down, make sure you’re comfortable with the initial payment in case there’s no relief in the near future.
Real Estate Professionals Leaving the Industry Behind
As anticipated, the tough market conditions have led to a significant number of realtors and loan officers leaving the industry. Between October 2022 and January 2024, 85,049 real estate agents left the industry, according to Housing Wire. This number is expected to have risen further due to the recent NAR settlement making it more difficult for agents to collect commissions.
For mortgage loan originators (MLOs), the situation is similar. In January 2024, only 93,938 MLOs originated at least one mortgage in the previous 12 months, down from 178,270 in June 2021, according to Ingenius. Many people entered the industry during the favorable market conditions of 2020 and 2021, with sub-3% mortgage rates making it an attractive career option.
My thoughts are straightforward: many people joined the industry in 2020 and 2021 for what seemed like easy money. When times got tough, they moved to other industries that seemed more appealing. Those of us who view this as a career rather than just a job are facing these challenges head-on. As a consumer, look for professionals who are committed to this industry as their livelihood. These individuals are more likely to provide the best service and support.
