Mortgage Costs Reach Lowest Level Since Spring
Data indicates that rising interest rates in 2023 have made housing less accessible than before, but there seems to be some relief on the horizon for buyers, as a new report shows that mortgage prices and housing costs have dropped to their lowest levels since spring.
Real estate brokerage company Redfin reported that the median mortgage payment in the United States was $2,503 for the four-week period ending December 10, the lowest level since April and $233 less than the peak recorded in October. This decrease in costs comes as the average 30-year mortgage rate fell to 6.82% on Wednesday, the lowest level since May, marking the first time it has fallen below 7% since July.
Mortgage Costs Decline with Prospects of Federal Interest Rates Approaching Peak
Mortgage rates dropped after Federal Reserve officials indicated on Wednesday that they were unlikely to raise interest rates beyond the current range of 5.25% to 5.5%. This shift suggests that the Federal Reserve may be nearing the end of its two-and-a-half-year campaign to combat inflation by raising interest rates, which has increased borrowing costs for housing, cars, and other types of loans.
“Prices have declined after the Federal Reserve provided good news for buyers at their meeting on December 13, suggesting they are on track to reduce interest rates more quickly and further than expected,” according to the report.
Having reached close to 8% just two months ago, mortgage rates have been declining steadily, and Redfin stated that the trend indicates a forecast of mortgage rates dropping to 6.6% by the end of 2024. The rise in mortgage rates has contributed to increased housing costs, making homeownership less attainable for many Americans.
“Mortgage rates are likely to remain well above their pandemic lows as financial markets increasingly believe the country will avoid a recession in 2024,″ wrote Redfin’s chief economist, Daryl Fairweather, who added that a strong economy will prompt the Federal Reserve to keep interest rates at their current level until 2024.
“However, they are likely to cut rates two or three times starting in the summer, which is why mortgage rates are declining as the year progresses,” Fairweather said.
Increase in Listings and Mortgage Applications
With mortgage rates falling, more people are applying for loans, as mortgage purchase applications rose by 4% from the previous week, and increased by 19% from the three-decade low recorded in early November.
The rising demand for housing is also aided by an increase in new listings, with the largest increase in December since July 2021, reflecting a 7.6% rise in available listings compared to last year, according to the new report. However, the number of active listings is down 5.4% from the same time last year, although this is the smallest decline in listings since June.
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Source: https://www.investopedia.com/report-shows-homebuyers-seeing-lower-housing-costs-8416042
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