Warning: Undefined variable $custom_content in /home4/comcompare/public_html/mortgagenews/wp-content/plugins/code-snippets/php/snippet-ops.php(582) : eval()'d code on line 10
The Federal Reserve’s decision to slow the pace of rate hikes this week has pushed mortgage rates lower – even as the central bank reiterated that it will continue to firm the economy next year.
These lower rates are encouraging news for the industry, which saw interest rates top 7% in October, but will that be enough to sustain home sales? This is a question that remains unanswered.
The median interest rate for 30-year fixed-rate mortgages averaged 6.31% on December 15, down two basis points from the previous week (6.33%), according to the latest Freddie Mac investigation. At 3.12% a year ago, the same lending rates were about half of what they are today.
Sam Khater, the chief economist at Freddie Mac, said in a statement that mortgage rates continued their downward trend this week amid weaker inflation data and a modest shift in monetary policy from the Federal Reserve resonated with the economy.
Coupled with the central bank raising the federal funds rate with a 50 basis point rate hike following the two-day Federal Open Market Committee, policymakers expect the cost of borrowing to rise to 5.1% by the end of 2023, up from the September projection.
Matthew Speakman, the senior economist at Zillow Home Loans, said market reaction to Wednesday’s Federal Reserve announcement – in which members officially expected a higher-than-expected forward rate for their policy rates – was less likely.
The news initially took the wind off the market, but Fed Chairman Jerome Powell’s assurances that the central bank was likely to change its outlook if more evidence emerged that inflationary pressures had eased helped to spur investors. and to push inflation to push bond yields. the mortgage rates that often affect — go back, Speakman explained.
The 10-year Treasury bill, which dictates mortgage rate movements, fell from 3.51% on Tuesday to 3.49% on Wednesday after the Bureau of Labor Statistics released its consumer price index, which showed a faster slowdown in inflation than economists expected.
Homebuyers are weighing their options
The Mortgage Bankers Association (MBA) expects the recent downward trend in mortgage rates to continue.
In addition to moderating home prices, the drop in rates should “encourage more homebuyers to return to the market in early 2023,” said Bob Broeksmit, president and CEO of the MBA.
Last week, mortgage demand rebounded on a downward trend after consumer prices showed slower-than-expected growth in October.
Total mortgage application volume increased by 3.2% last week compared to the previous week, driven by refinances and purchases.
George Ratiu, head of economic research at Realtor.com, said that with more homes for sale and more of them with price cuts, some buyers are coming to grips and finding that falling prices offer better options within their budget.
For housing markets more broadly, continued moderation in inflation should ease the upward pressure that has led to higher mortgage rates this year, Ratiu said.
He also said that while a return to the 3.0% range is unlikely any time soon, a flattening of rates into the 5.5%-6.0% range in 2023 would also provide housing markets with a better basis.
Realtor.com forecasts existing home sales to fall to 4.53 million units next year, compared to 5.28 million units expected in 2022. The National Association of Realtors expects home sales to decline a further 6.8% in 2023 to 4.78 million.
Recent rate declines that have led to a stabilization in buying demand are good news, but the bad news is that “demand remains very weak in light of affordability hurdles that are still quite high,” Khater said.
Reference Source: Housing Wire
