One Economist Thinks Elon Musk Holds The Key To Affordable Mortgages – Here's Why

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The housing market is grappling with a significant decline in sales due to high home prices and elevated mortgage rates, which hover around 7%.

The challenging environment has forced many potential buyers out of the market, particularly first-time homebuyers whose share has hit a 43-year low.

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According to National Association of Realtors Chief Economist Lawrence Yun, one potential factor that could influence mortgage rates is billionaire Elon Musk’s actions.

Yun suggests that Musk's recent moves, particularly those related to Tesla and X (formerly Twitter), could impact market sentiment and interest rates.

While the exact mechanisms are complex, Musk's influence extends beyond the tech industry. His actions can have broader economic implications and his decisions could shape future mortgage rates and the overall housing market.

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"The overall inflation rate is normalizing and the Federal Reserve can move away from its current restrictive monetary policy, which means further cuts to the short-term interest rate in upcoming months," Yun told MarketWatch.

That could force mortgage rates down.

The October consumer price index (CPI) report showed a 2.6% year-over-year increase, with housing costs driving a significant portion of the rise. While this marks a decline from the peak inflation rate of nearly 9% in June 2022, the Fed's suggested target of 2% inflation remains elusive.

The Fed's aggressive rate-hiking campaign in 2022 aimed to curb inflation, but it's important to note that mortgage rates aren't directly tied to the federal funds rate. Instead, they track the 10-year Treasury yield, often influenced by market expectations of future Fed actions.

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As market participants weigh the potential impact of various economic factors, including ongoing geopolitical tensions and fiscal policies, the trajectory of interest rates remains uncertain. This uncertainty could lead to further fluctuations in mortgage rates, making it challenging for homebuyers and refinancers to accurately predict future costs.