The average rate on a 30-year fixed rate mortgage declined for the fifth straight week, according to Freddie Mac’s weekly survey. The average came in at 6.31%, down just slightly from 6.33% the week prior. The struggle for many would-be homebuyers, or would-be refinancers, is that 6.31% is still more than 3% higher than rates were on average just a year ago. Furthermore, home prices are still significantly elevated which is stifling demand due to high cost of financing.
Freddie Mac economists noted, “Mortgage rates continued their downward trajectory this week, as softer inflation data and a modest shift in the Federal Reserve’s monetary policy reverberated through the economy. The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand. The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”
The National Association of Realtors (NAR) addressed inventory and sales in its year-end Real Estate Forecast Summit and predicts that existing home sales will drop by nearly 7% from 2022-2023, hitting 4.78 million sales. The NAR also expects median home prices to stay relatively flat next year, coming in around $384,500.
The NAR’s chief economist Lawrence Yun also believes mortgage rates won’t go any higher, but don’t get too excited about a sharp decline anytime soon. “I think the peak has already occurred and we are on a downward path, but we will not go back to 3% mortgage rates,” said Yun. “I think the mortgage rate could go down even further because there is a gap between the 30-year fixed rate mortgage and the 10-year Treasury yield and inevitably the abnormal high spread will begin to narrow, which means that there is even further room for mortgage rates to decline in the upcoming months as their spread narrows.”
*Article courtesy of Matt Toping & Kieron O'Grady of Movement Mortgage. Amended by Chris Della Rosa.