Why Fannie Mae, Freddie Mac, and Redfin soared this week

stock Federal National Mortgage Association (FNMA 6.80%)also known as Fannie Mae, was up 11.6% as of the close this Thursday, according to data provided by S&P Global Market Intelligence. Federal Home Loan Mortgage Corporation (FMCC 5.51%)Online real estate platform also known as Freddie Mac redfin (NASDAQ: RDFN) are also up more than 9% each this week as of this writing.

A common catalyst: Low mortgage rates are boosting home affordability, mortgage activity and new home listings.

Mortgage applications and new listings are surging.

In a press release last week, Fannie Mae’s Economic Strategy Research (ESR) group forecast a “mild recession” in 2024, with “consumer spending rising relative to personal income and restrictive monetary policy still having an impact on the economy.” ” was predicted. “

However, the group also expects a return to growth in 2025. Thanks to the sharp decline in mortgage rates in recent weeks, mortgage applications have already rebounded about 15% from their November lows. Fannie Mae added that it expects this trend to continue as mortgage rates continue to fall.

In fact, according to data released today by Freddie Mac, the average mortgage interest rate on 30-year fixed-rate loans fell to 6.61% this week, the lowest since May. This is also the 9th consecutive week of decline since mortgage interest rates hit their highest in 22 years at the end of October.

Meanwhile, these interest rate declines have already led to a double-digit percentage increase in homeowners contacting real estate agents for help selling their homes, according to Redfin last week. Redfin added that new listings also increased immediately by 9% year-over-year, marking the highest annual increase since July 2021. And in a press release this morning, Redfin said U.S. pending home sales were down 4% year-over-year over four weeks. Ends December 24 – Smallest decline in nearly two years.

2024 Rates, What’s Next for Selling Your Home?

As Fannie Mae points out, encouraging trends in the real estate and mortgage markets can be traced back to recent actions by the U.S. Federal Reserve. The Federal Reserve previously implemented a historically fast pace of rate hikes from March 2022 to August 2023 to cool economic growth and curb high inflation. But as the ripple effects of the economic slowdown became more evident and inflation trends moved toward the Fed’s 2% target, Fed officials last month kept the federal funds rate steady for a third straight month. More importantly, at least three rate cuts are scheduled for 2024.

To be clear, the Federal Reserve does not directly set mortgage interest rates. However, monetary policy affects how mortgage lenders decide the interest rates they will charge on loans.

Anyway, this news is comforting to weary home shoppers. Redfin also found that only 15.5% of homes for sale in the U.S. last year were “affordable,” as measured by recent home prices and average household income. This is the lowest percentage of affordable housing on record.

That’s not to say that the current headwinds holding back the housing and mortgage markets will diminish completely in the near future. Conversely, Fannie Mae researchers suggest that the combination of affordability issues, low inventory and the “lock-in effect” of existing homeowners with low mortgage rates makes it more likely that there will be a “meaningful but slow” recovery. Home sales next year.

But no matter how slow the recovery, this will still be good news not only for homebuyers in general, but also for companies like Redfin, Fannie Mae, and Freddie Mac that are perfectly positioned to benefit from the housing market rebound.