We expect the Fed to cut rates on Wednesday, says Mortgage Bankers Association's Fratantoni

Core Viewpoint - The housing market is expected to face prolonged elevated mortgage rates, potentially remaining above 6% through 2028, despite anticipated rate cuts by the Federal Reserve [1][4]. Mortgage Rate Outlook - The Federal Reserve is expected to implement three to four rate cuts over the next six months in response to a weakening job market and slowing economy [3]. - Mortgage rates are projected to remain in the 6% to 6.5% range, with recent rates at approximately 6.25%, the lowest seen this year [5][4]. Housing Market Trends - 2023 marked a low point for the housing and mortgage market, with mortgage rates more than doubling to around 8% at one point due to significant rate hikes by the Fed [6][7]. - An increase in home sales is anticipated in 2026, projected to rise by about 5% as inventory levels improve [7]. - The inventory of homes has increased significantly, with new construction and existing homeowners listing more properties, leading to a more favorable environment for buyers [8][11]. Buyer Behavior - First-time buyers have adjusted to the current mortgage rates, budgeting for rates between 6% and 6.12% [10]. - Move-up buyers, who may have locked in lower rates around 3%, are hesitant to sell in the current market [10]. Builder Strategies - Builders are actively buying down mortgage rates to around 5% to stimulate sales, particularly for move-in-ready properties [12][14]. - The current market has about nine months of supply at the current sales pace, prompting builders to continue offering buy-downs until inventory levels normalize [13][14].