Mortgage rates just dropped and home prices may be ‘peaking’, but buyers hoping for a free fall ‘will be disappointed’

Mortgage rates just dropped and home prices may be ‘peaking’, but buyers hoping for a free fall ‘will be disappointed’

After surpassing 7% for the first time in 20 years, US mortgage rates fell again this week, even as the housing market continues to reel from high borrowing costs.

Interest rates also fell, despite the Federal Reserve’s (Fed) announcing an additional three-quarter point hike in the trend-setting federal funds rate. This shows that inflation has not yet been contained.

“(Mortgage) rates appear to have already priced in some of the impact of higher Fed rates,” he said. Nadia Evangelou saysSenior Economist, National Association of Realtors.

Still, depending on how quickly or slowly consumer prices and the still-bubble job market begin to ease, mortgage rates could start rising again soon.

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30 year fixed rate mortgage

Interest rates on 30-year fixed mortgages — America’s most popular mortgages — averaged 6.95% this week, down from 7.08% a week ago, the mortgage giant said. Freddie Mac reported Thursday.

At this point last year, the 30-year rate averaged 3.09%.

At current rates (and current prices), the median home’s monthly mortgage payment is $965 more than it was a year ago. George Latiou saysSenior Economist at Realtor.com.

“The dramatic rise in financing costs has effectively reduced most buyers’ budgets,” says Ratiu.

15 year fixed rate mortgage

rate 15 year fixed mortgage Freddie Mac said the average for the week was 6.29%, down from 6.36% last week and 2.35% a year ago.

Sales are still declining and prices in many markets are following suit.

Average home prices have fallen in more than one-third of the 100 largest US housing markets, according to the U.S. Home Market. research From Florida Atlantic University (FAU) and Florida International University.

Markets that saw the most price drops were primarily the most highly rated locations, including San Jose, California, Austin, Texas, San Francisco, and Boise, Idaho. and Salt Lake City.

“The national housing market is definitely slowing and appears to be at the peak of the current housing cycle,” says FAU Business College economist Ken H. Johnson.

5 year variable rate mortgage

The average five-year adjustable-rate mortgage (ARM) rate stood at 5.96% this week, down slightly from last week’s 5.96%.

At this point last year, the five-year ARM averaged 2.54%.

ARMs start with a fixed interest rate that typically lasts 3 to 10 years. Interest rates are usually lower than long-term fixed mortgages, such as 15 or 30 years.

But after the first period, the ARM rate will be adjusted up or down based on benchmarks such as: prime rate.

read more: Should you wait for more housing crashes before buying a home? 3 reasons the end of 2022 is the perfect time to jump in

Fed Impact on Mortgage Rates

The Federal Reserve does not set mortgage rates, but its federal funding rates affect various borrowing costs, including mortgages.

The Fed’s recent rate hikes have impacted demand in a variety of sectors, but perhaps less so than in housing.

“The housing market has been very overheated in the post-pandemic years due to increased demand and low interest rates,” said Fed chairman. Jerome Powell stated at this week’s press conference. “The housing market needs to rebalance supply and demand.”

But Powell said, from a financial stability perspective, the market looks better now than it did in the years leading up to the global financial crisis, when lending standards were much looser than they are now. said.

“This is a very different situation and does not appear to indicate financial stability issues,” he said.

Where do interest rates go from here?

Bright MLS chief economist Lisa Sturtevant said mortgage rates could rise to 8% or more by the end of this year or early next year if inflation proves persistent.

The latest data on consumer prices is due out next week and could indicate future Fed action.

“Interest rates may fluctuate in the coming weeks, but homebuyers who expect mortgage rates to drop significantly will be disappointed,” says Sturtevant.

Mortgage rates could stabilize around 7% if inflation eases and the Fed eases its aggressive rate hikes, she said.

up to date Forecast from the Mortgage Bankers Association (MBA) shows that the average 30-year fixed rate will peak in the final quarter of the year and then decline in 2023.

Mortgage applications fall for 6th straight week

According to the latest information, the decline in mortgage activity continued last week, down 0.5% from the previous week. MBA survey.

Specifically, mortgage applications to buy a home were down 1% from the previous week and down 41% from last year. Refinancing applications for existing mortgages he dropped 0.2%, down an astounding 85% from a year ago.

“Excluding the ARM loan interest rate, all other loan interest rates are more than three percentage points higher than they were a year ago,” said Joel Kang, MBA’s vice president and deputy chief economist.

“These rate increases continue to put pressure on both buying and refinancing activity, and the ongoing affordability crisis impacting the broader housing market, as seen in deteriorating trends in housing starts and home sales. It just adds to the price challenge.”

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

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