Homebuyers hoping for a better climate in 2023 have longer to wait, as they now face the highest mortgage rates to start a new year since 2002. However, analysts remain hopeful that today’s volatile rates will stabilize in the coming months.
Sam Khater, Freddie Mac’s chief economist said in a recent interview that the inflationary pressures are easing and should lead to lower mortgage rates in 2023.
30-year fixed-rate mortgages
The average 30-year fixed rate is 6.48%, up from last week when the average rate was 6.42%, Freddie Mac reported Thursday. Nearly doubling the rate from this time last year of 3.22%. Many economists are reporting that the rates will likely stabilize below 6% as inflation continues to lessen in the upcoming months.
Nadia Evangelou, the senior economist for the national association of realtors acknowledges the fact that only a fraction of potential buyers will be able to afford a home if these conditions linger.
15-year fixed-rate mortgages
The average 15-year fixed rate moved up to 5.73%, compared to the previous week’s rate of 5.68%. This rate similar to the 30-year fixed rates is up more than double from this time last year as it was 2.43%.
The real estate markets are right in the middle of the winter season which can create a barrier for many buyers because of its high prices and high rates. George Ratiu the manager of economic research at Realtor.com explained that many might have to wait until the start of the spring shopping season for more clarity on the housing market direction for the year.
Pending Home Sales
Pending home sales plunged 32% in the month of December, compared to the same period last year, reports Redfin. Sales dropped to their lowest level since at least 2015.
Due to the 6% plus mortgage rates, a record-low amount of new listings, and the typical holiday slowdown, the market fizzled out at the end of 2022.
Seattle Redfin agent Shoshana Godwin stated that there are two categories of buyers in the current market, first-time buyers who are hoping prices and competition is more manageable than the previous years, and the returning buyers who lost out on multiple homes during pandemic bidding wars and are back to try again.
Because of the more relaxed market in the last months of 2022, many buyers may now be able to find homes for slightly lower prices than last year, but many believe that the market could again become more competitive in the following months.
Mortgage applications sank 13.2% from two weeks prior, according to the Mortgage Bankers Association. (Data wasn’t released last week since the MBA’s offices were closed for the holidays.)
The holiday season and the end of the year typically is a slower time for the housing market and with the mortgage rates well above 6%, the mortgage applications continued to decline over those two weeks.
Refinance activity also declined 16.3% from two weeks ago — and is 87% lower than at the same time last year.
Throughout many areas of the country, home-price growth has started to slow down but with the elevated mortgage rates continuing to remain steady there has been a strain put on affordability and has been keeping prospective homebuyers out of the market.
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MoneyWise, Serah Louis, ‘With the housing market ‘fizzled out, 2023 is off to the worst start in decades – but here’s why analysts are dreaming of a mild spring’, January 7, 2023.