Mortgage Rates Drop to Lowest Level Since September

Mortgage payments fell across the board this week, with the fixed rate on a 30-year mortgage falling to 6.46%. This is the lowest in 30 years since September 2022, and is almost a full point below the 7.33% high seen last November. In addition, the rates are expected to continue to fall if the inflation rate is reduced in the coming months.

Current mortgage interest rates, without discount points unless otherwise noted, as of January 19:

  • 30-year fixed: 6.46% (down from 6.63% last week).
  • 20-year fixed: 6.53% (down from 6.68% last week).
  • 15-year fixed: 5.72% (down from 5.95% last week).
  • 10-year fixed: 5.88% (down from 6.07% last week).
  • 5/1 AMO: 5.44% (down from 5.51% last week).
  • 7/1 ARM: 5.52% (down from 5.61% last week).
  • 10/1 ARM: 5.92% (down from 5.98% last week).
  • 30-year jumbo loan: 6.46% (down from 6.63% last week).
  • 30 year FHA loan: 5.76% and 0.06 points (down from 5.85% last week).
  • VA commercial loan: 5.91% and 0.05 points (down from 6% last week).

Erika Giovanetti

“As inflation continues, mortgage rates have fallen again this week. Prices are at their lowest level since September of last year, boosting homebuyer demand and building sentiment. The reduction in prices is putting a lot of demand in the housing market, but the supply of housing remains a concern.”

– Sam Khater, Freddie Mac’s chief economist, in a statement January 19

Mortgage rates generally aim to continue to decline through 2023 because the prices of the customers are moderate. High inflation has led to the Federal Reserve’s monetary policy in the past year, where policymakers implemented a series of rate hikes and strengthened the central bank’s balance sheet. This is what led to the rise in mortgage interest rates in 2022, and the Fed’s decision this year is expected to be adjusted again when prices fall and the economy weakens.

This adjustment it has already started it happens. At their December meeting, Fed officials unanimously agreed that they should slow the pace of rate hikes. Economists analyzed by Reuters The Fed said it would raise the federal funds rate by 25 basis points (0.25 percent) at its first two policy meetings in 2023 before keeping rates on hold for the rest of the year. . This is in stark contrast to the seven increases implemented last year, four of which were 75 basis points.

If the central bank does slow its rate hikes at the pace seen by investors, the rate will be set at 4.75%-5% in March. And depending on the shape of the economy at that time, some investors say that the Fed may start lowering the rate.

“While unemployment remains low, economic data continue to point to a fall in inflation,” said Orphe Divounguy, senior macroeconomist at Zillow, in a nutshell. “A few new indicators include consumer sales and a further decline in manufacturing prices in December. Investors suspect that a cold economy will cause the Federal Reserve to stop, or even change, its program of interest rate increases. .”

Feature of the Week: Falling Home Prices

The current home sales price has dropped ten thousand dollars in the last six months, from a high of $413,800 in June 2022 to $366,900 now, according to National Association of Realtors. Year-over-year home price increases remained consistent, as they have been for the past 130 consecutive months, recording 2.3% growth in last year.

Although this is the slowest annual rate since May 2020, this is the highest home price recorded for the month of December. Lawrence Yun, chief economist of NAR, said housing prices seasonally low in the last month of the year.

“Maybe half of the country is in a price reduction, but the other half of the country is in the price increase,” said Yun, adding that the reduction of The biggest prices are made at the most expensive end of the market.

Like weather continues to moderate in the coming months, housing price changes are likely to weaken for the first time in nearly 11 years. It’s hard to imagine that with 6% mortgage rates, existing home prices will be higher than seen last spring when rates were at 4%-5%.

Erika Giovanetti

There is good reason to expect further price recovery. Nadia Evangelou, senior economist and director of real estate research at NAR, says that “consumers more willing to negotiate because homes stay on the market.” In December, the average home was on the market for 26 days after being listed for sale, up from 24 days in November and 21 days in October.

“Right now, there are very few offers on the list,” Evangelou said. “The average buyer gets a few offers for their home compared to four offers last year when buyers rushed to take advantage of the 3% discount.” historically low prices.”

For homes that have been on the market for more than 30 days, buyers must reduce the initial price by 12% on average, said Evangelou. And after four months on the market, the discount rate increases to 15%. As home prices and mortgage rates fall, monthly payment it’s more affordable for home buyers.

Let’s say you’re looking to buy a $400,000 home with a 30-year fixed-term mortgage at a 6% rate. With a 10% down payment, your monthly principal and interest would be $2,158 – that’s before property taxes, home insurance and private mortgage insurance. But if you were able to negotiate the purchase price down to 12%, your new monthly P&I payment would be $1,899.

However, Evangelou said, there are still real estate agents faced with low research each in housing costs. Even six-income earners will struggle to find a home they can afford in the current housing market.

“Buyers making $100,000 can now afford to buy a home up to $380,000,” Evangelou said. “But only 40% of the listings are within their price range.”

One thing to consider: If mortgage rates continue to fall, affordability will improve among all segments of homebuyers. But if low prices bring more buyers to the market, it can stimulate competition, which can drive home prices higher. And as always, home buying conditions will vary one regional market to the other.

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