People looking to buy a home may welcome the news that the average rate on a 30-year fixed mortgage dropped to the lowest level since May, to 6.61%. Treasury rates have continued to decline along with expectations for rate cuts as early as January, albeit a small percentage (18%).  According to Sam Khater, Freddie Mach’s Chief Economist, “The rapid descent of mortgage rates over the last two months stabilized a bit this week, but rates continue to trend down.” He added, “Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation, and a nascent rebound in the housing market.”

However, despite the lower rates, pending home sales for the month of November were flat for the month (October was revised down 1.2%) and year over year, sales are down 5.2%.  While rates may be coming down, for people who have rates in the 2-4% range, over 6% is still not appealing, and inventory remained constrained.  Still lower rates mean lower monthly payments, making buying more attractive. According to Lawrence Yun, NAR chief economist, “With mortgage rates falling further in December – leading to savings of around 300 per month from the recent peak in rates – home sales will improve in 2024.”

The partying on Wall Street continues today as all the major indices continue to move higher, although modestly.  Five of the 11 S&P 500 sectors are in the green.  There does seem to be some movement into those unloved safe havens with Utilities being the best performer. 

Meanwhile, Energy is the worst performer once again, as WTI declines another 1.9% and hovering below $74. Inventory levels at Cushing are at the highest level since August and API data showed a 1.8m barrel increase. As more shippers are back in the Red Sea, we may continue to see prices retreat.