Mortgage rates continue to trend lower as investors focus on more signs that inflation is cooling.
“Wages data this week offered a glimmer of hope as it showed that hourly compensation in the second and third quarters was lower than previously reported for all sectors except manufacturing,” said Danielle Hale, chief economist at Realtor.com. prices are also falling.
A report from the Bureau of Labor Statistics on Wednesday showed that real hourly wages, which take into account both wages and consumer prices, actually fell 2.3% in the third quarter and 4% over the past four quarters.
Hale says next week’s consumer price index data and the Fed’s next federal funds rate hike could provide more clarity on where the economy is headed.
“This means that mortgage rates could continue on the volatile path seen so far in 2022, making it very difficult for buyers to set and stick to a home buying budget.”
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30 year fixed rate mortgage
Freddie Mac said Thursday that the 30-year fixed rate average continued to move lower than in previous weeks. It fell to an average of 6.33% from 6.49% a week ago.
A year ago, the 30-year rate was less than half that amount, at 3.10%.
Nadia Evangelou, chief economist at the National Association of Realtors, believes rates will stabilize near 6% next year if inflation continues to slow.
“With a mortgage rate of 6%, housing will be more affordable for many buyers. Even though the typical family cannot currently afford a home at the median price, with eligible income exceeding earned income, housing will once again be affordable for Americans if prices approach 6%,” he writes.
15 year fixed rate mortgage
The average 15-year fixed home loan also fell, from 5.76% last week to 5.67% this week.
This time a year ago, the 15-year rate was 2.38%.
“Mortgage rates fell for the fourth straight week on growing concerns about weak economic growth,” said Sam Khater, chief economist at Freddie Mac.
“Mortgage rates have fallen the most over the past four weeks since 2008. Although the decline in rates has been large, homebuyer sentiment remains low and there is not a large positive response in purchase demand to these low rates.”
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Mid-sized markets are expected to grow
Although experts predict home sales will continue to decline next year, there may be more hope in more affordable mid-size markets like Louisville and Toledo as buyers are wary of high prices and premiums.
“As housing affordability continues to be a major challenge for both buyers and renters, affordable mid-sized housing markets offer a potential haven that workers with flexible arrangements may continue to seek,” Hale said.
He adds that these markets are home to local manufacturing, government, health and education employers.
“As a result, while the number of home sales across the country is expected to decline, we expect the top housing markets to remain relatively active in 2023.”
Mortgage applications continue to decline
Despite lower prices, homebuyer sentiment remains subdued. According to the Mortgage Bankers Association (MBA), mortgage applications fell 1.9% compared to last week.
“Purchasing activity slowed last week, partially offset by a decline in conventional home loan applications and an increase in FHA and USDA loan applications,” said Joel Kahn, vice president and deputy chief economist at MBA.
Refinancing activity is 5% higher than last week, but still 86% lower than last year.
However, mortgage availability improved slightly in November – the first increase in nine months “as lenders continue to navigate the challenging environment brought on by higher interest rates and a slower housing market,” Kahn said.
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