Hey, so here’s the scoop: Mortgage rates dropped to the lowest point since March ’cause job growth kinda tanked this summer. The 30-year fixed rate hit 6.7% for the week ending August 7, down from 6.87% the week before, and that’s as low as it’s been since mid-March when it was 6.62%.
It all started last Friday morning after July’s job report came out. Turns out, the economy only added 73,000 jobs, way less than what most experts thought. Plus, earlier estimates for May and June were slashed by 258,000. Investors were bummed out—like expecting a Barbie for your birthday and getting pencils instead.
Friday’s lackluster job report made mortgage rates dive, ’cause now folks think growth will be slower and the Fed might cut rates sooner, explained Kara Ng from Zillow. With the Federal Reserve meeting looming around September 17, there’s now an expectation they’ll cut short-term rates, which seemed unlikely before the jobs data hit.
The Fed’s supposed to manage both unemployment and inflation, cutting short-term rates when jobs are scarce and raising them when prices skyrocket. Until the job report, inflation was more worrisome, but now unemployment’s taken center stage. That’s why investors reckon the Fed might cut rates soon.
Odeta Kushi from First American says the mortgage market’s behaving like the Fed’s about to act next month, with rates dipping in anticipation. She reckons if confidence about a September rate cut builds, rates might keep sliding.
But let’s say mortgage rates stop dropping. Then, this week’s dip won’t change much, according to Ng. It might lure a few buyers, but it’s not a game-changer. On the flip side, if the economy tanks, rates and property values might drop simultaneously, says Mike Chadwick from Fiscal Wisdom Wealth Management.
Lower rates and home prices sound great for first-time buyers, but a major recession would need to happen, which means lots of folks might be out of work or worrying about layoffs. Not exactly the ideal condition for a bustling housing market.
