Mortgage rates fell to their lowest level since mid-September, sending eager homebuyers out of their winter retreats.
“Home-buying demand has been thawing since the months-long freeze that gripped the housing market,” says Sam Khater, chief economist at housing giant Freddie Mac.
“Potential homebuyers are still sensitive to changes in mortgage rates, but there is still significant demand, fueled by first-time homebuyers.”
Economists are also watching the Fed’s next rate hike – and are hopeful that it will raise interest rates to Federal funds rate You will keep mortgage rates tame.
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30-year fixed-income mortgages
average Fixed rate for 30 years It fell further to 6.13%, Freddie Mac reported Thursday. Last week, the average rate was 6.15%.
This time last year, the median rate was 3.55%.
Although this week’s mortgage data marked the third straight weekly decline, some economists remain skeptical about interest rates dropping below the 6% mark.
“Although inflation has slowed, the expected continued restrictive monetary policy may keep mortgage rates in the 6%-7% range in the short term,” Writes Realtor.com economist Jiayi Xu.
15 years of fixed-income mortgages
average Fixed rate for 15 years It decreased to 5.17%, compared to the previous week’s rate of 5.28%.
This time last year, it was 2.80%.
Mortgage rates may fall further in the following weeks as investors expect the Federal Reserve to raise interest rates in February thanks to easing inflation. Says Nadia Evangelo, chief economist at the National Association of Realtors.
“In fact, this is the first time in almost two years that the inflation rate is finally lower than it was the year before,” Evangelo says, noting that the inflation rate was 6.5% at the end of 2022, compared to 7.0% in 2021. .
Housing affordability is still an obstacle
While new home sales in December were up 2.3% over November’s revised number, it certainly wasn’t a reaction to falling prices. In fact, the median sale price of a new home increased 7.8%, to $442,100.
“The sentimentality of home shopping can be amplified by the ups and downs in mortgage rates over the past year, which mostly involved ups rather than downs,” Writes Daniel Hill, Chief Economist at Realtor.com.
“Whether shoppers focus on the recent delay in costs or the period that continues to dominate the trend year after year is likely to influence how eager they are to approach the housing market in 2023.”
Hill adds that while recent data suggests some households may be returning to the market, others “may still be struggling with costs rising from where they were a year ago.”
“Although the pace of rent and price growth has slowed, finding a bargain remains a distant find for consumers.”
Mortgage applications jump
Mortgage demand is up 7% from last week, according to the Mortgage Bankers Association (MBA).
Joel Kahn, vice president and deputy chief economist at MBA, called the price drop “good news for prospective homebuyers looking forward to the spring homebuying season.”
Home buying activity remains subdued, but if prices continue to fall and house prices fall further, we expect potential buyers to return to the market. Many were waiting for the affordability challenges to subside,” he was Says.
Refinancing activity also increased 15% this week, though that’s still 77% behind last year’s pace — providing “very little incentive to refinance” for any borrowers locked into low rates, Kahn notes.
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