Your daily adult tube feed all in one place!
Wall Street 'Oracle' reveals the mortgage rate magic number which will get the housing market moving
Mortgage rates have fallen to their lowest level in 15 months - but one expert is warning a bigger drop is needed to kickstart the frozen housing market.
The 'Oracle of Wall Street' Meredith Whitney has said rates need to drop below 6 percent.
Once rates are within the 5 percent field buyers tend to feel encouraged that it is worth taking the plunge.
Whitney, who earned her nickname after predicting the global financial crisis, said house prices must also drop by a tenth in order to make any material difference in affordability.
Decades-high mortgage rates and record house prices mean the average payment on a home loan this year is double what it was in 2000, she said.
Meredith Whitney said that mortgage rates need to hit 6 percent or below in order to kickstart the frozen market
The average 30-year fixed-rate mortgage eased to 6.47 percent this week, according to Freddie Mac figures out August 8.
This was the largest decline so far this year - down from 6.73 percent the week prior.
Rates are now the lowest they have been since mid-May last year.
A predicted interest rate cut from the Federal Reserve in September is likely to drive them down more.
Elevated rates have kept buyers on the sidelines. They have also kept prospective sellers from putting properties on the market.
Millions of Americans are locked into lower rates on existing loans and do not want to be forced to take out a costlier mortgage if they move home.
'Mortgage rates plunged this week to their lowest level in over a year following the likely overreaction to a less than favorable employment report and financial market turbulence for an economy that remains on solid footing,' said Sam Khater, Freddie Mac's Chief Economist.
'The decline in mortgage rates does increase prospective homebuyers' purchasing power and should begin to pique their interest in making a move.'
While this decline is welcome, Whitney, CEO of Meredith Whitney Advisory Group, advises that a bigger shift is needed to make a real change in the market.
'If mortgage rates go below 6 percent, you will see a spike in both home equity originations as well as home sales,' she told DailyMail.com.
'When volume starts to hit the market, prices will go down, and the cycle will be self perpetuating.'
Prices need to come down by at least 10 percent alongside mortgage rates falling in order to make the market affordable for new homebuyers, she said.
Over the last several years, the housing market has become increasingly unaffordable for millions of Americans.
Since 2020, mortgage rates have more than doubled, Whitney said, and median home prices have increased by 33 percent.
This has translated into a 101 percent increase in monthly principal and interest costs to new homeowners.
In some cases, this would mean homeowners' payments would still go up even if they bought a cheaper house.
'With wage growth of only 22.6 percent, it's no wonder hopeful homebuyers continue to stay on the sidelines.
'Even when buyers have the requisite down payment, the monthly carrying costs of owning a home are beyond the reach of many potential home buyers.'
Once the housing market begins to unlock, however, she predicts home prices will begin a period of decline - but this could be several months or more away.
'In the meantime, modest declines in mortgage rates can make second mortgages and home equity lines of credit more attractive for homeowners who are increasingly cash constrained,' Whitney added.
For the first time in 15 years, struggling consumers are beginning to tap the equity in their homes, she said.
A home equity loan - also known as a home equity installment loan or a second mortgage - allows owners to borrow against the equity of their property.
The equity you own in a property is the difference between its market value and the outstanding balance of your mortgage.
The total value of the US housing market has grown 6.6 percent in the last 12 months, according to Redfin. Homes have gained a huge $3.1 trillion in value to reach a record $49.6 trillion.
The average 30-year fixed-rate mortgage eased to 6.47 percent this week, according to Freddie Mac figures out August 8
'If mortgage rates go below 6 percent, you will see a spike in both home equity originations as well as home sales,' said Meredith Whitney
Some 72 percent out of 5,000 potential home buyers said pulling the trigger would be feasible if mortgage rates dropped below 5 percent
'The decline in mortgage rates does increase prospective homebuyers' purchasing power,' said Sam Khater, Freddie Mac's Chief Economist
Whitney said previously that the Federal Reserve would need to cut rates by 75 to 100 basis points in order to make any real impact on mortgage rates.
This would lower interest rates below 4 percent, from the current level of between 5.25 percent and 5.5 percent.
Following an aggressive campaign of rate hikes, the central bank has kept rates at this level - which is the highest in 23 years - since July 2023.
This, in turn, has helped keep mortgage rates high.
Benchmark borrowing costs do not directly affect mortgage rates, but home loan costs will dip when banks think a future cut is likely.
Mortgage rates track the pattern of 10-year Treasury yields, which are determined by a range of factors including inflation, economic growth and the Fed's funds rate.
A weak jobs report on August 2 and stock market decline on August 5 mean markets are pricing in a rate cut in September - but economists are undecided as to how big the decrease will be.
Whitney's comments come after a study earlier this year revealed that the majority of prospective homebuyers are waiting for rates to dip even further - below 5 percent - to follow through with a home purchase.
A Realtor.com survey of 5,000 Americans conducted in November last year, when rates were above 7 percent, found only 18 percent of people were waiting for rates to fall below 7 percent.
Some 22 percent said they would buy a home if rates went below 6 percent, it found.
But once rates went below 5 percent, then 72 percent of people said it would be feasible to consider buying a property.