Fixed mortgage rates could fall to 3.3% by the end of the year as the nation’s economy slows, according to Lawrence Yun, chief economist of the National Association of Realtors

That would put the rate just a smidge below the 3.31% seen in November of  2012 – the lowest average for a 30-year fixed mortgage in Freddie Mac data going back to 1971. 

Yun made his comment on Friday after seeing a Labor Department report that showed a weakening jobs market. Total nonfarm payrolls in August climbed a below-forecast 130,000, even with the support of 25,000 temporary hires of Census workers, and the numbers for prior months were adjusted downward.

“The economy is clearly weakening, and the employment conditions show a lagging indicator,” Yun said. “The soft job gains in August assures that the Federal Reserve will be cutting interest rates.”

While the Fed doesn’t directly control home loan rates, the actions and words of the central bankers influence the bond investors who decide the coupon rates, or yields, they’ll accept for investing in mortgage-backed securities. If investors expect the Fed to cut its benchmark rate, and if the central bankers issue a statement after their Sept. 18 meeting citing a slowing economy and low inflation, bond buyers may settle for smaller yields. That translates into lower financing costs for homeowners.

“Mortgage rates could fall to 3.3% before the year-end,” Yun said. “But lower rates may not help with affordability because home prices are re-accelerating higher, easily above the latest wage growth.”

The average hourly earnings rose to $28.11 in August, a gain of 3.2% from a year earlier, according to Friday’s jobs report. While NAR hasn’t yet issued its housing data for August, its forecast estimates the median U.S. home price in the current quarter is 4.4% higher than a year ago. 

A shortage of inventory is adding to the upward pressure on home prices, adding to the impact of lower financing costs that allow people to qualify for bigger mortgages, Yun said.

“Housing inventory has recently stopped rising, putting upward pressure on home prices of moderately priced homes,” Yun said. “But there is still a time to get the economy into a higher gear with increased home building of affordable homes and lessening trade tensions.”

Mortgage rates have tumbled through most of 2019, reaching a three-year low of 3.49% in September's first week, according to Freddie Mac.