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Tag Archives: Mortgage
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Mortgage rates fall to lowest level since September
DeBianchi Real Estate’s Sam DeBianchi discusses mortgage rates and shares her outlook for the housing market into next year.
Mortgage rates continued to fall this week to their lowest levels since September as the latest round of economic data showed signs that inflation is starting to cool.
The average rate on a 30-year fixed mortgage fell to 6.15% on Thursday from 6.33% last week, according to mortgage buyer Freddie Mac. A year ago, the average rate was 3.56%.
“As inflation continues to moderate, mortgage rates declined again this week,” Freddie Mac chief economist Sam Khater said. “Rates are at their lowest level since September of last year, boosting both homebuyer demand and homebuilder sentiment.”
Contractors work on a home under construction in Antioch, California, US, on Tuesday, June 14, 2022. (Photographer: David Paul Morris/Bloomberg via Getty Images / Getty Images)
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“Declining rates are providing a much-needed boost to the housing market, but the supply of homes remains a persistent concern,” Khater added.
Meanwhile, the average rate on a 15-year fixed mortgage fell to 5.28% from last week when it averaged 5.52%. A year ago, it averaged 2.79%.
The big rise in mortgage rates during the past year has throttled the housing market, with sales of existing homes falling for 10 straight months to the lowest level in more than a decade.
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Local real estate business is down slightly from this time last year.Home Sales Wf 2
Though inflation at the consumer level has declined for six straight months, Fed officials have signaled that they may raise the central bank’s main borrowing rate another three-quarters of a point in 2023, which would be in a range of 5% to 5.25%.
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The Associated Press contributed to this report
‘We can expect mortgage rates to go down’
Homebuyers may finally catch a break this year, says one expert, as signs of fading inflation could drive mortgage rates lower as soon as this month.
“Mortgage rates have declined by almost a full percentage point since they peaked in November,” Melissa Cohn, vice president for William Raveis, a real estate brokerage firm, told Yahoo Finance Live (video above). “I think that we can expect mortgage rates to go down another quarter or even as much as a half a percent over the course of the next month.”
The average interest rate on the 30-year fixed mortgage has fallen by three-quarters of a percentage point since mid-November, according to Freddie Mac, hitting 6.33% this week. The decline in rates comes after a series of government reports showed signs that inflation in the U.S. was finally cooling.
For some buyers, a mortgage rate drop means gaining back purchasing power and re-entering the market.
“It’s the beginning of 2023. Everyone is back to zero in terms of meeting their goals and everyone has to bring loans in the door,” Cohn said. “Banks are going to sharpen their pencils, they’re going to tighten up their margins, and do whatever they can to bring volume in the door and lower rates will bring more real estate transactions.”
Rates won’t drop to 3%
After roughly two years of record-low mortgage rates, the 30-year rate last year increased at their fastest clip in over 50 years. Most of the rate hikes were due to the Federal Reserve’s zealous fight against rampant consumer price growth.
However, signs of cooling inflation in recent months are increasing the likelihood that the Fed will reconsider its pace of hikes – giving mortgage rates a bit of relief. This week new data showed that had dropped to its lowest level in over a year.
Still, rates probably won’t return to levels seen during the early years of the pandemic.
“People can’t expect that we’re going to go back to a 3%, 30-year fixed rate,” Cohn said. “Now that happened because of COVID and the pandemic, and we don’t want to find ourselves in that position again. If we can get interest rates to go back to where they were pre-COVID, call that anywhere from 3.75% to 4.5%, that would be a home run.”
How to get the best interest rate
The combination of higher rates, climbing home prices, and inflation were a massive blow for plenty of first-time buyers last year, who were often priced out of the market.
While a rate drop can significantly boost your buying power, there are other ways you can improve your chances of snagging a lower rate. According to Cohn, the key is to start off early by improving your credit score.
“Many of the banks with better rates are going to want to see someone have three to four different active tradelines on their credit history,” she said, noting buyers should have sufficient money for the down payment plus extra. “We find a lot of first-time homebuyers getting stuck because they maybe have enough money for the down payment, but haven’t taken into consideration all of the closing costs and what you need to have for reserves.”
Another way to soften your rate is by considering an adjustable-rate mortgage or a government-backed home loan, which often carry lower interest rates and may be more accessible.
Finally, keep an eye on the demand in your area. Sellers have been more open to offering incentives, such as mortgage rate buy-downs, cash for closing costs, and even price reductions, so buyers still in the market should jump at those opportunities while they still can.
“When mortgage rates are higher, real estate prices tend to be a little bit softer,” Cohn said. “When interest rates do come dow … real estate prices will start to go back up again and there’ll be more competition for the homes on the market.”
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.
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Mortgage rates drop after CPI inflation report
A prospective home buyer, left, is shown a home by a real estate agent in Coral Gables, Florida.
Getty Images
The average rate on the 30-year fixed mortgage dropped to 6.28% Tuesday, according to Mortgage News Daily. It is now at the lowest level since mid-September.
The decline came after a lower-than-expected reading of the November’s consumer price index, a widely watched measure of inflation. The report sent investors rushing into U.S. Treasury bonds, causing yields to drop. Mortgage rates follow loosely the yield on the 10-year Treasury.
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“The second consecutive month of reassuring CPI data continues to build a case that inflation has turned a corner, but rates will be careful about reading too much into that potential shift given the volatility of the data in recent months,” said Matthew Graham, chief operating officer at Mortgage News Daily. “The bond market will also want to see what the Fed does with this info in tomorrow’s updated Fed rate forecasts in the dot plot.”
Mortgage rates began rising at the start of this year and accelerated in the spring and summer, with the 30-year fixed going from around 3% to well over 7% by the end of October. That sent the housing market into an early deep freeze. Sales of existing homes have fallen for nine straight months and were down 24% in October year-over-year, according to the latest read from the National Association of Realtors.
But rates then fell sharply in November, after the CPI report for October indicated that inflation was cooling. The rate ended November at 6.63%. Some suggested, albeit cautiously, that the drop in rates might be bringing buyers back to the market.
“There are some very very modest green shoots over the last few weeks, as rates have come down, but I am not ready to get sucked back into the conversation we had in August when we felt better,” Doug Yearley, CEO of luxury homebuilder Toll Brothers, said on the company’s quarterly earnings call with analysts last week. Yearly was referring to a very brief rate drop in August.
Redfin reported homebuyer demand “has started ticking up” in November. It’s demand index, which measures requests for home tours and other homebuying services from Redfin agents, was up 1.5% from a month earlier but down 20% from a year earlier during the four weeks ending Nov. 27.
“There have been a handful of pieces of relatively good news for the housing market lately, but we’re far from out of the woods,” said Redfin deputy chief economist Taylor Marr. “Key indicators of homebuying demand will likely be teetering on a knife’s edge with every data release that comes out related to the Fed’s path to eventually bringing rates down.”
All that optimism, however, did not translate into higher mortgage rate locks for homebuyers, which are generally an indicator of future home sales. Those rate locks fell 22% in November, compared with October, and were down 48% year-over-year, according to mortgage tech and data firm Black Knight.
“It’s still extremely unaffordable even with rates coming down, even with prices coming down in each of the last four months. We’re still less affordable than we were at the peak of the market in 2006, and you’re seeing that play out in the rate lock numbers,” said Andrew Walden, vice president of enterprise research strategy at Black Knight.
Walden points to inventory still being about 40% shy of where it should be, while the homebuilders continue to pull back and potential sellers stay on the sidelines. Even as prices weaken and rates come down, he said both are still substantially higher than they should be compared with incomes to make housing affordable by historical standards. And none of those are going to move that much any time in the near future.
“As we move throughout 2023 you’re going to see prices continue to soften, you’re going to see incomes hopefully continue to grow and eat up some of that gap, and I think likely we are going to see rates come down from where they are today, but it’s going to take an extended period of time to get there,” said Walden.