Mortgage rates approaching 6% unleash a horde of homebuyers, and even lower rates could be on the way, but economists warn consumers aren’t ‘invincible’ yet
Refusing to pass up a good opportunity, a wave of homebuyers pulled the trigger this week as mortgage rates inched ever closer to the 6% mark.
“Rates are at their lowest level since September of last year, boosting both homebuyer demand and homebuilder sentiment.” writes Sam Khater, chief economist at property giant Freddie Mac.
At the same time, analysts warn that buyers who haven’t made their move yet will need to watch the ups and downs of this shaky economy, as mortgage rates are far from the only factor affecting affordability.
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30-year fixed-rate mortgages
Average 30-year fixed rate it fell further to 6.15% this week, compared to 6.33% last week. A year ago at this time, the rate averaged 3.56%.
“With the Federal Reserve’s monetary policy tightening, the US housing market has been under significant pressure. While our 2023 forecast anticipates that ongoing inflation will put upward pressure on rates, recent favorable data has helped drive down mortgage rates.” He says Realtor.com economist Jiayi Xu.
“As the economy overcomes the decline in inflation, mortgage rates may continue to fluctuate in the near term, within the 6% to 7% range that we have seen in the last five months.”
Of course, Xu acknowledges, mortgage rates are still incredibly high compared to last year, creating “financial barriers” for many buyers.
15-year fixed-rate mortgages
The average rate in a 15 year mortgage loan it fell from 5.52% to 5.28% this week. This time a year ago, the 15-year fixed rate was 2.79%.
Nadia Evangelou, a senior economist at the National Association of Realtors, thinks rates may fall further.
“Falling mortgage rates create opportunities for a lot of homebuyers,” Evangelou says.
“A lower mortgage rate lowers the monthly payment. Since the recent spike in rates in mid-November, buyers can save about $300 each month with rates close to 6%.”
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Mixed economic data keeps analysts cautious
The latest government data indicates inflation it went from 7.1% in November to 6.5% in December. At the same time, US retail sales for December posted their biggest drop in 12 months, signaling weakening consumer demand.
Savings are at a near record low and consumers are increasingly relying on their credit cards, putting home ownership out of reach for many Americans.
“While the slower inflation rate in December is a positive sign, business and investor concerns about economic growth continue to mount as weaker retail sales data reminds us that the American consumer is not invincible.” Xu writes.
Xu notes that while “national unemployment was at long-term lows” in December, the tech industry in particular has been reporting thousands of layoffs.
Mortgage applications soar
Demand for mortgages jumped 27.9% from last week, according to the Mortgage Bankers Association (MBA).
“Mortgage application activity rebounded strongly in the first full week of January, with refinancing and purchasing activity increasing in double-digit percentages compared to last week, which included the observance of the New Year holiday. New”. He says Mike Fratantoni, Senior Vice President and Chief Economist at the MBA.
“As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”
Refinancing activity also shot up 34%, although it is still 81% lower compared to the same period last year.
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