Mortgage Rates Fall for Third Consecutive Week
In Jonesboro, Georgia, mortgage rates have dropped for three straight weeks. The 30-year fixed rate averaged 7.44% on Thursday, down from 7.5% a week earlier, according to Freddie Mac. However, the rate remains well above last year’s level of 6.61%.
Reason for the Decline
Freddie Mac’s Chief Economist, Sam Khater, stated that the rate went down this week because “new data indicate that inflationary pressures are receding.” The government reported on November 14 that consumer prices climbed 3.2% in the 12 months ended in October, decelerating from 3.7% in September.
Khater believes that the combination of continued economic strength, lower inflation, and lower mortgage rates should likely bring more potential homebuyers into the market.
Housing Sales Slump
So far this year, high mortgage rates have stifled sales. Existing-home sales slid 2% in September from August, according to the National Association of Realtors (NAR). Sales retreated 15.4% from a year ago.
NAR Chief Economist Lawrence Yun explained that limited inventory and low housing affordability have hampered home sales throughout this year. However, with inventory limited, demand has been strong enough to push home prices higher despite the mortgage rate increase. The median existing-home price registered $394,300 in September, up 2.8% from $383,500 a year earlier.
“Lack of inventory is providing the support for high prices, but it’s also making it super difficult for first-time buyers to enter the housing market,” Yun noted.
Yun expects the depressed state of sales to last through year-end, with home sales dropping 18% for 2023 as a whole. That comes after a 17% decline last year.
Light at the End of the Tunnel?
Things are starting to look up on the supply side. The inventory of unsold existing homes climbed 2.7% in September from August to 1.13 million. That’s the equivalent of 3.4 months’ supply at the current monthly sales pace. Six months is typically considered a balanced market.
“Builders are back on their feet, up 5% in newly constructed home sales year to date,” Yun said. “Builders can simply create inventory. In a housing shortage environment, builders are really benefiting.”
Many economists believe that inflation is falling enough to keep the Federal Reserve from raising rates again. “I believe we’ve already reached the peak in terms of interest rates,” Yun said. “The question is when are rates going to come down?”
He forecasted that mortgage rates will slide to 6%-7% by the spring buying season and anticipates that more sellers will then enter the market.
However, if you’re a renter who wants to buy, you might want to hold off until housing prices correct. For many, mortgage payments are just too high for a house to be affordable. The rule of thumb is that no more than 28% of your income should be needed to pay a mortgage.
Source: Florida Realtors
Orginal article: Link To Article – provided by Kansas City Realtors
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