Jeff Sica of Circle Squared Alternative Investments recently emphasized that the Federal Reserve’s recent small cut in interest rates won’t resolve the ongoing housing affordability issues. He pointed out that gold continues to be a reliable safeguard against inflation and uncertainties in the global market.
This week, mortgage rates saw their first increase since mid-July, according to Freddie Mac’s latest report. The average rate for a 30-year fixed mortgage climbed to 6.3%, up from 6.26% the previous week. To compare, this rate was just 6.08% a year ago.
Freddie Mac’s chief economist, Sam Khater, noted that despite the rise, housing market activity remains strong, with applications for home purchases up by 18% and refinancing applications up by 42% compared to last year.
The average rate for a 15-year fixed mortgage also increased to 5.49% from 5.41% last week, while a year ago it averaged 5.16%. Although rates are rising, they remain near their lowest levels in nearly a year, providing some opportunities for both buyers and homeowners looking to refinance.
However, challenges remain. Recent data revealed that only 28% of homes are affordable for the typical American household, reflecting a drop in buying power. Following the Fed’s decision to lower the benchmark interest rate by 25 basis points for the first time since December 2024, the new federal funds rate now stands between 4% and 4.25%. This adjustment comes after a lengthy period of maintaining steady rates amid economic uncertainties.
In August, new single-family home sales surged to their highest level in more than three and a half years. However, there are concerns that this spike may not reflect genuine market health, and a potential slowdown in the labor market could hinder the positive effects of lower mortgage rates.
Economists caution that the recent increase in home sales may not be reliable. They note that housing data can be quite variable and are often revised, indicating that the boost in sales may not continue in the upcoming months.
