Homebuyers hoping for a better climate in 2023 may have to wait longer as they now face the highest mortgage rates since 2002 to start the new year.
However, analysts remain hopeful that today’s volatile exchange rates will stabilize in the coming months.
“While mortgage market activity has slowed significantly over the past year, inflationary pressures are easing and should lead to lower mortgage rates in 2023,” said Freddie Mac Chief Economist Sam Khater.
“Homebuyers expect prices to fall more significantly, and when they do, a strong job market and the large demographic tailwind of millennial renters will support the buying market.”
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30 year fixed rate mortgage
The average 30-year fixed rate is 6.48%, compared with last week’s average rate of 6.42%, Freddie Mac reported Thursday.
This time a year ago, the average was just 3.22%.
“While rates more than doubled a year ago, rates will stabilize below 6% in 2023 as inflation continues to slow in the coming months,” said Nadia Evangelou, chief economist at the National Association of Realtors.
He admits that if these conditions continue, only a fraction of potential buyers will be able to buy a house.
“With an eligible income near the $100,000 threshold, 32% of all households and 15% of all renters can currently afford a median home.”
15 year fixed rate mortgage
The 15-year fixed rate average rose to 5.73% from the previous week’s rate of 5.68%.
This time last year it was 2.43%.
“Capital markets are reacting to uncertainty created by the dichotomy between rising recessionary expectations and incoming economic data showing continued resilience,” writes George Ratiu, manager of economic research at Realtor.com.
“Property markets are firm during the winter season, with high prices and rates posing a barrier to home ownership for many buyers.”
Ratiu notes that the buyer of an average-priced home today could face a monthly payment that is 64% higher than last year.
“We may have to wait until the start of the spring buying season to get more clarity on the direction of housing markets this year, especially as both buyers and sellers pull back from the market.”
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Pending home sales plummeted
Redfin reports that pending home sales fell 32% in December compared to the same period last year. Sales fell to their lowest level since at least 2015.
Redfin data journalist Dana Anderson writes, “The housing market is in shambles at the end of 2022 due to mortgage rates above 6%, a looming recession, record low new listings, extreme winter weather and the typical holiday slowdown.”
The real estate giant points to the steepest declines in Las Vegas, Phoenix and Austin, the “pandemic homebuying hotspots” that have each seen expected sales decline by more than 50%.
“Two categories of buyers are starting to look right now: first-time buyers who hope prices and competition are more manageable than they have been in the past few years, and buyers who have taken a break after losing many homes to auctions during the pandemic. War fury,” says Seattle Redfin agent Shoshana Godwin.
Godwin believes buyers can find homes for slightly lower prices now than last year, but the market could become more competitive in the coming months.
“I expect new listings to remain low as a certain pool of buyers squeezes in the few homes available while homeowners maintain low interest rates.”
Mortgage applications are at their lowest level since the 1990s
According to the Mortgage Bankers Association, mortgage applications are down 13.2% from two weeks ago. (Information was not released last week as the MBA offices were closed for the holidays.)
“The end of the year is typically a slower time for the housing market, and with mortgage rates still well above 6% and the threat of a recession looming, mortgage applications have continued to fall to their lowest level since 1996 over the past two weeks. says Joel Kahn, vice president and deputy chief economist for the Mortgage Bankers Association.
Refinancing activity is also down 16.3% from two weeks ago and 87% lower than the same period last year.
“While home price growth has slowed in many parts of the country, high mortgage rates continue to hamper affordability and keep potential homebuyers out of the market,” Kahn said.
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This article provides information only and should not be construed as advice. Provided without any warranty.