A brief 'window of opportunity' now opens for homebuyers as mortgage rates fall, but experts warn of a 'longer-term war that is not over yet'

A brief ‘window of opportunity’ now opens for homebuyers as mortgage rates fall, but experts warn of a ‘longer-term war that is not over yet’

A brief

A brief ‘window of opportunity’ now opens for homebuyers as mortgage rates fall, but experts warn of a ‘longer-term war that is not over yet’

While turkey and pies were significantly more expensive this Thanksgiving season, Americans have something to be thankful for: Mortgage rates continue to fall.

Borrowing costs plunged for the first time after encouraging October inflation data showed consumer prices rose 7.7% in October, slower than economists expected.

But don’t celebrate right away. Many experts still believe that further Fed rate hikes could push average mortgage rates back into the 7% range over the next few weeks.

“This year, homebuyers have had to deal with nearly 3 times the volatility in mortgage rates of a typical year. With inflation and the economic outlook continuing to evolve and the Fed continuing to watch and react, volatility could very well get worse before it starts to improve,” writes Danielle Hale, Chief Economist at Realtor.com .

“Markets interpreted the October inflation data to mean the Fed won. However, Fed policymakers made it clear that they viewed the victory (one-month inflation data) as a battle. in a longer-term war that is not yet over.

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30 Year Fixed Rate Mortgages

The average 30-year fixed rate mortgage fell to 6.58%, Freddie Mac reported on Wednesday. Last week, the 30-year rate averaged 6.61%, and a year ago it was 3.10%.

This rate cut could provide a “window of opportunity” for buyers trying to save on their monthly payments, says George Ratiu, head of economic research at Realtor.com.

“After generally higher mortgage rates throughout 2022, the recent swing in favor of buyers is welcome,” writes Ratiu.

“It could save the buyer of a median-priced home listing more than $100 a month compared to what they would have paid when rates were above 7% just two weeks ago.”

15-year fixed rate mortgages

The average 15-year fixed mortgage also rose from 5.98% last week to 5.90% this week. A year ago at this time, the 15-year rate averaged 2.42%.

Despite lower rates, many buyers may still be locked out of the housing market.

“A long-term housing shortage is keeping home prices high, even as the number of homes on the market for sale has increased, and buyers and sellers may find it more difficult to align price expectations. when the cost of financing fluctuates so much,” says Ratiu.

“A cooling rental market, in which rent growth is returning to historic norms, may offer hesitant buyers a haven from which to regroup and perhaps reassess their plans in the new year.”

Rent growth slowed for the ninth consecutive month, according to Realtor.com, with the median asking rent in the nation’s 50 largest metropolitan areas falling to $1,734.

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Rapidly slowing market breaks more records

Pending sales fell more than 32% in October compared to the same period last year, marking the biggest drop ever, according to Redfin’s latest monthly report.

And nearly 60,000 home-buying deals failed, a record 17.9% of deals closed under contract.

Nearly a quarter of homes for sale also saw a drop in price, double the rate of last year.

“The Fed’s actions to curb inflation are slowing the housing market at a rate not seen since the financial crisis,” said Chen Zhao, head of economic research at Redfin.

“There are already early but promising signs of slowing inflation, which led to lower mortgage rates last week. If this progress continues, buyers who have recently walked away from deals could return to the market. and sellers may be less inclined to reduce their prices.”

However, the Fed has said more rate hikes may be on the way – although they may not be as aggressive as previous increases – which could drive mortgage rates higher still.

Mortgage applications continue to rise

Mortgage applications were up another 2.2% from last week, according to the Mortgage Bankers Association (MBA).

“Lower mortgage rates should improve the purchasing power of potential buyers, who have been largely sidelined as mortgage rates have more than doubled over the past year,” said Joel Kan, vice president and Deputy Chief Economist of the MBA.

Although refinancing activity increased by 2% compared to the previous week, it is still 86% lower than the same period last year.

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

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