Mortgage rates fell again this week after dropping nearly half a percentage point last week.
30-year fixed-rate mortgages averaged 6.58% in the week ended Nov. 23, up from 6.61% a week earlier, according to Freddie Mac. A year ago, the 30-year flat rate was 3.10%.
Mortgage rates have been rising for much of 2022, helped by the Federal Reserve’s unprecedented campaign to raise interest rates to curb soaring inflation. But rates fell last week amid reports that inflation may have finally peaked.
“This volatility makes it difficult for potential homebuyers to know when to enter the market, and this is reflected in recent data that shows a slowdown in existing home sales across all price brackets,” said Sam Cather, chief economist at Freddie Mac.
The average mortgage rate is based on the mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who put down 20% and have excellent credit history. But many buyers who put up less money up front or have less than ideal credit history will pay more than the average rate.
The average weekly rates normally posted by Freddie Mac on Thursday are posted a day early due to the Thanksgiving holiday.
Mortgage rates tend to track the yield on 10-year US Treasuries. When investors see or expect a rate increase, they take steps that raise yields and mortgage rates.
10-year Treasury bonds have hovered in a lower range of 3.7% to 3.85% since two inflation reports were released nearly two weeks ago showing prices rose at a slower pace than expected in October. This has led to a dramatic shift in investor expectations for future rate hikes, said Daniella Hale, chief economist at Realtor.com. Prior to this, 10-year Treasury bonds rose above 4.2%.
However, the market may be too quick to celebrate an improvement in inflation, she said.
At the Fed’s November meeting, Chairman Jerome Powell pointed to the need for further rate hikes to curb inflation.
“This could mean that mortgage rates could rise again, and that risk would increase if inflation figures are higher next month,” Hale said.
While it’s hard to market the timing to get a low mortgage, many potential homebuyers see a window of opportunity.
“Following higher mortgage rates throughout 2022, the recent move in favor of buyers is welcome and could save a homebuyer at an average price of more than $100 a month compared to what they would have paid when rates were above 7%. just two weeks ago,” Hale said.
As a result of falling mortgage rates, the number of applications for purchase and refinancing slightly increased last week. But refinancing activity is still more than 80% below last year’s pace, when rates were around 3%, according to the Mortgage Bankers Association’s weekly report.
However, with weekly fluctuations in mortgage rates averaging nearly three times normal annual rates and home prices still at historic highs, Hale said many would-be buyers have backed off, Hale said.
“The long-term housing shortage is keeping home prices high, even as the number of homes for sale has increased and it may be harder for buyers and sellers to reconcile price expectations,” she said.
In a separate report released Wednesday, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau said new home sales jumped in October, up 7.5% from September but down 5.8% from September. with last year.
While this was higher than forecast and contrary to the recent drop in sales, it is still lower than a year ago. Housing construction has been historically low for a decade and builders are pulling back as the housing market shows signs of slowing down.
“New home sales have beaten expectations, but a reversal of the overall downward trend is still uncertain given high mortgage rates and developer pessimism,” said Robert Frick, corporate economist at the Navy Federal Credit Union.
Despite the 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.