Mortgage rates fell for the fifth week in a row last week, following a positive inflation report for November and the Federal Reserve’s decision to cut interest rates, Freddie Mac reported.
The average 30-year fixed-rate mortgage rate fell to 6.31% for the week ended Dec. 15, according to Freddie Mac’s Primary Mortgage Market Survey. That was down from the previous week, when it averaged 6.33%, but significantly higher than last year’s 3.12%.
The 15-year mortgage was at 5.54% last week, up from 5.67% the previous week and up from 2.34% last year.
According to Sam Khater, chief economist at Freddie Mac, the steady decline in mortgage rates has helped kick-start mortgage demand. Mortgage applications rose 3.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
“The good news for the housing market is that the recent downturn has led to a stabilization of purchase demand,” Khater said. “The bad news is that demand remains very weak amid affordability barriers that are still quite high.”
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The Fed is signaling that it will continue to raise rates
Last week, the Fed announced a 50 basis point interest rate hike, down from the more aggressive 75 basis point hikes of the previous four meetings.
However, Federal Reserve Chairman Jerome Powell said inflation remains elevated. He indicated at a news conference last week that more interest rate hikes would follow the 2% inflation target.
“For investors, Fed tightening still poses the risk of pushing the economy into recession in 2023,” Realtor.com senior economist Georg Ratiu said in a statement.
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According to Redfin’s forecast, home prices will continue to decline in 2023
A drop in mortgage rates over the past few weeks helped boost applications for purchases and refinances last week, Ratiu said. That’s likely to improve as the housing stock improves, he said.
“With more homes available for sale and more of them sporting price cuts, some buyers are doing the math and finding that rate cuts offer better options in their budgets,” Ratiu said.
Mortgage rates could fall to a range of 5.5% to 6% in 2023 if inflation continues to improve and provide an “improved foundation” for the housing market, Ratiu said.
Homebuyers are also ready to take a break from record high home prices. According to Redfin’s 2023 housing forecast, home sales are falling to their lowest level in more than a decade.
“We expect the median U.S. home sale price to decline about 4% — the first annual decline since 2012 — to $368,000 in 2023,” Redfin said. “Prices would fall further if not for lack of homes for sale: We expect new listings to continue to decline for most of next year, keeping overall inventory at historic lows and preventing prices from falling.”
If you’re looking to buy a home or refinance your current loan, you may want to consider an online marketplace like Credible to compare your options. Visit Credible to compare multiple mortgage lenders at once and find the one that suits you best.
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