'A glimmer of hope': As mortgage rates fall for a fourth week, experts say homes could soon become affordable again - although volatility is here to stay

‘A glimmer of hope’: As mortgage rates fall for a fourth week, experts say homes could soon become affordable again – although volatility is here to stay

‘A glimmer of hope’: As mortgage rates fall for a fourth week, experts say homes could soon become affordable again – although volatility is here to stay

Mortgage rates continue their downward trend as investors watch for further signs of slowing inflation.

“This week’s labor cost data provided a silver lining as it showed hourly compensation was lower than previously reported in the second and third quarters for all sectors except manufacturing,” writes Danielle Hale, chief economist at Realtor.com, adding that gas prices are also falling.

Wednesday’s report from the Bureau of Labor Statistics said real hourly wages — which take into account both wages and consumer prices — actually fell 2.3% in the third quarter and 4% during the third quarter. of the last four quarters.

Hale says the following week’s consumer price index data and the Fed’s upcoming federal funds rate hike could provide more clarity on where the economy is headed.

“This means mortgage rates could continue on the volatile path seen so far in 2022, which has made it very difficult for buyers to establish and maintain a home buying budget.”

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30 Year Fixed Rate Mortgages

The average 30-year fixed rate continued its downward trend from weeks past, Freddie Mac reported Thursday. The average slipped to 6.33% from 6.49% the previous week.

A year ago, the 30-year rate was less than half that amount, at 3.10%.

Nadia Evangelou, senior economist for the National Association of Realtors, estimates that rates will stabilize at nearly 6% next year if inflation continues to slow.

“With a mortgage rate of 6%, housing will become more affordable for many buyers. While the typical family currently cannot afford to buy a median-priced home because qualifying income exceeds earned income, housing will become affordable again for Americans if rates hover around 6%,” she writes.

15-year fixed rate mortgages

The average 15-year home loan also fell from 5.76% last week to 5.67% this week.

A year ago, at this time, the 15-year rate was 2.38%.

“Mortgage rates fell for the fourth consecutive week, on growing concerns about lackluster economic growth,” Freddie Mac chief economist Sam Khater said.

“Over the past four weeks, mortgage rates have fallen by three-quarters of a point, the biggest drop since 2008. Although the rate cut has been significant, buyer sentiment remains weak, with no major positive demand reaction. purchase at these lower rates.”

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Mid-sized markets are expected to experience growth

Although experts predict home sales will continue to slide next year as buyers remain wary of high prices and rates, there may be more hope in mid-sized markets that offer more affordability, like Louisville and Toledo.

“As the cost of housing continues to be a major challenge for buyers and renters, mid-size affordable housing markets offer a potential haven that workers with flexible arrangements can continue to seek out,” Hale says.

She adds that these markets are home to domestic employers in manufacturing, government, health care and education.

“As a result, we expect major housing markets in 2023 to remain relatively active, although the number of nationwide home sales is expected to decline.”

Mortgage applications continue to decline

Homebuyer sentiment remains weak despite lower rates. Mortgage applications fell 1.9% from last week, according to the Mortgage Bankers Association (MBA).

“Purchasing activity slowed last week, with a decline in conventional purchase inquiries partially offset by an increase in FHA and USDA loan inquiries,” says Joel Kan, MBA vice president and deputy chief economist. .

Refinancing activity was 5% higher than last week, but still 86% lower than last year.

However, the availability of mortgage credit improved slightly in November – the first increase in nine months “as lenders continued to navigate a difficult environment brought on by higher rates and a much slower housing market”, explains Kan.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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