Growth concerns push down rates

Friday’s disappointing jobs report drove the sharp fall in mortgage rates, as investors now anticipate slower economic growth and an earlier Fed rate‐cut cycle. July’s employment report from the Bureau of Labor Statistics revealed not only that job creation was below expectations in July, but also that May and June were revised down by a significant amount. With the revisions, the three-month average change in payrolls is now the lowest since 2010, excluding the temporary labor market collapse during the early months of the pandemic in 2020. 

Zillow maintains its expectation that mortgage rates will end the year near the mid-6% range.

Impact on the Housing Market

This dip in mortgage rates likely won’t be enough to salvage the sluggish home buying season. Lower rates may tempt a few prospective home buyers off of the fence, but a dip of this size isn’t likely to make a notable difference. Because a weakening labor market is behind this drop in rates, it’s even more unlikely to bring buyers back to the market significantly. People tend to hunker down and hold off on major purchases when they are concerned about their jobs, even if their financial picture hasn’t changed.

The good news for buyers is the market has gotten back to balance. Sellers have returned to the market in bigger numbers than buyers this year. That means buyers who can afford it have more options and more negotiating power than any summer in recent memory.