Recent data relating to job growth and unemployment are the evidence that Fed policy is working, thus a rate cut at its September meeting, even a large one, may be appropriate, Realtor.com Chief Economist Danielle Hale stated in a Wednesday press release. Market forecasts are contemplating at the September FOMC meeting rates could be dropped anywhere from 50 basis points to as much as 150 basis points.

While the FOMC does not control pricing on the benchmark 10-year Treasury used in the equation that sets mortgage rates, its actions on inflation and other economic news affects investor activity.

The revised forecast calls for the 30-year fixed to average 6.7% throughout 2024 and dropping to 6.3% by end of this year. This replaces the company's November 2023 outlook for an average of 6.8% for the full year, with rates at 6.5% at the end of 2024.

"Mortgage rates have finally begun to ease, and this trend is expected to continue as improving inflation enables the Fed to relax its tight policy, boosting homebuyer purchasing power," said Hale. "Furthermore, gains in the number of homes for sale mean that buyers have more negotiating power than they have had in recent years, which should help buyers and sellers find the middle ground necessary for more sales."

With the decline in rates, the company's forecast for home sales was boosted to 4.1 million units, compared to 4.07 million in the original prediction and from 4.09 million transactions during 2023.

The gain is small because existing home sales in the first half of the year were sluggish and 2024 has a short runway for more activity.

"During the first half of this year, we have seen homebuyers continue to remain sensitive to mortgage rates, and while home sellers are also affected, the binds of the mortgage rate lock-in effect appear to be loosening for some homeowners," Hale said. "These trends mean that home sales in 2024 will eke out only a small gain over 2023, but homebuyers have a fair amount to look forward to in the latter part of the year."

However, two upcoming events could impact the forecast: the implementation of the buyer's broker commission settlement and the Presidential election, Realtor.com said.

The impact of the National Association of Realtors settlement on the housing market and home prices is dependent in part on how the real estate industry and consumers adjust to the change.

Under the settlement that goes into effect this weekend, the traditional way buyer's real estate brokers are compensated, a commission split paid through the seller's agent, is expected to change.

"If this norm changes, we would expect the price of homes to adjust to reflect the fact that the former benefit — buyer agent compensation — is no longer included," a Realtor.com blog said.

While defining the election as a wildcard, Realtor.com is not expecting it to be "wild" on the economy or housing because both parties are running candidates (Vice President Kamala Harris and former President Donald Trump) who have served in the White House.

"As such, we think their economic policies will be quite predictable and markets will be able to handle whoever is elected," Realtor.com said. "We acknowledge, however, that the closer the race, the tougher it is to predict the outcome, which can spark volatility."