As we first outlined early last month, based on an analysis of the futures market for interest rate products, the expected value of the Fed’s rate cuts was suggesting there would be a total of three (3) quarter-point rate cuts in 2024, which was roughly half the number of cuts that some were banking on to drop the cost of capital and mortgage rates at the end of last year.
But having held firm for a month, the probability that the Fed will adopt at least three quarter rate cuts by the end of the year has just dropped, with fewer than three rate cuts now suggested and the average rate for a benchmark 30-year mortgage having already inched back up to 6.82 percent – which actually isn’t “historically high” – and Freddie Mac suddenly “not expect[ing] rates will decrease meaningfully in the near-term,” none of which should catch any plugged-in readers by surprise.