By Ovunc Kutlu
ISTANBUL (AA) - The US housing market needs more rate cuts to increase supply and affordability, Fitch Ratings said Thursday.
"Federal Reserve rate cuts will relieve pressures on the U.S. housing market, but mortgage rates are unlikely to fall below 5.0% before 2027," it said in a statement.
"The 30-year fixed mortgage rate and the 10-year Treasury yield have already priced in the 50bp Fed rate cut, and even with further cuts, declines in the 30-year mortgage rate to around 5.0% are contingent on the spread over 10-year Treasuries reverting to the 10-year pre-pandemic average of 1.8pp," it added.
Mortgage applications in the US rose further for the week ending Sept. 13 as rates declined for the seventh consecutive week to their lowest in two years, according to a Mortgage Bankers Association (MBA) report that was released Wednesday.
The average contract interest rate for 30-year fixed-rate mortgages declined for the seventh consecutive week to 6.15%, their lowest since September 2022, from 6.29% in the previous week. The rate for 15-year fixed-rate mortgages, meanwhile, decreased to 5.42% from 5.71%.
Fitch said housing demand, measured by homes sold above list price and the average sale-to-list price, has softened since August 2023, but remains above long-term averages.
It added that a further decline in mortgage rates will help improve affordability and support demand, but low inventory will likely constrain home sales until rates move closer to 5%.