Mortgage rates fell again this week, after plunging nearly half a percentage point last week.
The 30-year fixed-rate mortgage averaged 6.58% in the week ending Nov. 23, down from 6.61% the previous week, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.10%.
Mortgage rates have risen for most of 2022, boosted by the Federal Reserve’s unprecedented interest rate hike campaign to rein in soaring inflation. But last week, rates fell amid reports that inflation may finally have peaked.
“This volatility makes it difficult for potential buyers to know when to enter the market, and this is reflected in the latest data which shows a slowdown in sales of existing homes at all price points,” said Sam Khater, chief economist. by Freddie Mac.
The average mortgage rate is based on the mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who have a 20% down payment and have excellent credit. But many buyers who put less money up front or have less than perfect credit will pay more than the average rate.
Average weekly rates, typically released by Freddie Mac on Thursdays, are released a day earlier due to the Thanksgiving holiday.
Mortgage rates tend to follow the yield of 10-year US Treasury bills. When investors see or anticipate rate hikes, they take action that drives up yields and mortgage rates.
The 10-year Treasury has been hovering in a lower range of 3.7% to 3.85% since a pair of inflation reports showing prices rose at a slower pace than expected in October were released there almost two weeks ago. This has led to a big reset in investors’ expectations for future interest rate hikes, said Danielle Hale, chief economist at Realtor.com. Previously, the 10-year Treasury bond had risen above 4.2%.
However, the market might be a bit too quick to celebrate improving inflation, she said.
At the Fed’s November meeting, Chairman Jerome Powell stressed the need for continued rate hikes to keep inflation under control.
“That could mean mortgage rates could go up again, and that risk will increase if next month’s inflation is higher,” Hale said.
While it’s hard to time the market to get a low mortgage rate, many potential buyers see a window of opportunity.
“Following generally higher mortgage rates throughout 2022, the recent turnaround in favor of buyers is welcome and could save the buyer of a median-priced home more than $100 per month compared to this he would have paid when rates were above 7% just two weeks ago,” Hale said.
Due to lower mortgage rates, purchase and refinance requests increased slightly last week. But refinance activity is still more than 80% lower than last year’s rate when rates were around 3%, according to the Mortgage Bankers Association weekly report.
However, with weekly swings in mortgage rates averaging nearly three times those seen in a typical year and house prices still historically high, many potential buyers have backed off, Hale said.
“A long-term housing shortage is keeping home prices high, even as the number of homes for sale on the market has increased, and buyers and sellers may find it more difficult to align price expectations. “, she said.
In a separate report released Wednesday, the US Department of Housing and Urban Development and the US Census Bureau reported that new home sales jumped in October, rising 7.5% from September, but down 5. .8% compared to a year ago.
Although this was higher than expected and bucked a recent downward trend in sales, it is still lower than a year ago. Housing construction has been historically weak for a decade and builders have retreated as the housing market shows signs of slowing.
“New home sales have exceeded expectations, but a reversal of the overall downward trend is doubtful at this time given high mortgage rates and builder pessimism,” said Robert Frick, business economist at the Navy Federal Credit Union.
Despite a general downward trend in sales, new home prices remain at record highs.
The median price for a newly built home was $493,000, up 15% from a year ago – the highest price on record.