U.S. mortgage rates have inched up for the second week in a row, following reports that the economy added a staggering 517,000 jobs and inflation climbed 0.5% in January.
“At this rate, Americans need to put at least 18% down on the purchase of a median-priced home if they don’t want to be cost-burdened,” says Nadia Evangelou, senior economist for the National Association of Realtors (NAR).
While demand has weakened in the face of higher rates, the spring homebuying season could see the average 30-year home loan slide closer to the 6% mark — and buyers return to the market once more.
Don’t miss
‘Hold onto your money’: Jeff Bezos issued a financial warning, says you might want to rethink buying a ‘new automobile, refrigerator, or whatever’ — here are 3 better recession-proof buys
Rich young Americans have lost confidence in the stock market — and are betting on these assets instead. Get in now for strong long-term tailwinds
Here’s how much the average American 60-year-old holds in retirement savings — how does your nest egg compare?
30-year fixed-rate mortgages
The average 30-year fixed rate rose from 6.12% to 6.32%. A year ago at this time, the rate averaged 3.92%.
George Ratiu, manager of economic research at Realtor.com, believes mortgage rates will gravitate between the 6% to 7% range over the coming weeks.
“For housing markets, the rebound in rates translates into higher mortgage payments from a year ago, but lower than the summer 2022 peak of the market, because prices have dropped 11% over the past 7 months,” writes Ratiu.
“The buyer of a median-priced home is looking at a $1,985 monthly payment at today’s rate, 42% higher than last year, yet 6% lower than it would have been in June 2022.”
15-year fixed-rate mortgages
The average 15-year fixed rate also climbed to 5.51%. Last week, the loan averaged 5.25% and this time a year ago, it averaged 3.15%.
“The economy is showing signs of resilience, mainly due to consumer spending, and rates are increasing,” says Sam Khater, chief economist at Freddie Mac.
“Overall housing costs are also increasing and therefore impacting inflation, which continues to persist.”
Read more: UBS says 61% of millionaire collectors allocate up to 30% of their overall portfolio to this exclusive asset class
Mortgage rates could fall below 6% in 2023
Despite an uptick in the inflation rate for January, experts are still holding out hope for a drop in mortgage rates later this year.
Evangelou thinks inflation will ease in the second quarter of the year since rent price growth is slowing down. Rental prices make up around 40% of the consumer price index calculations.
“With a one-year lease being one of the most popular leases, the decelerating trend in rent price growth may occur sometime in the second quarter of the year. This could help cool inflation further and stabilize mortgage rates below the 6% threshold this year,” says Evangelou.
“NAR forecasts mortgage rates to average 5.7% in 2023.”
Mortgage applications plunge to lowest level this year
Demand for mortgages declined 7.7% from last week — a new low for 2023 — due to higher mortgage rates, according to the Mortgage Bankers Association (MBA).
“Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than two percentage points above last year’s levels and have significantly reduced buyers’ purchasing power,” says Joel Kan, vice president and deputy chief economist at the MBA.
Refinance activity also retreated by 13% this week, and is 76% lower compared to the same period last year.
“Refinance borrowers … remain on the sidelines as current rates provide little financial incentive to act.”
What to read next
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
Source: https://finance.yahoo.com/news/signs-resilience-mortgage-demand-plummets-150000725.html