The sharp drop in mortgage rates in December may have given this spring’s housing market an early start. Interest rates are about 1 percentage point lower than they were in October, and consumers expect them to fall further.
Optimism about mortgage rates rose sharply in December, according to Fannie Mae’s monthly consumer survey. For the first time since the survey began in 2010, a majority of online homeowners think interest rates will fall, not rise, said Mark Parim, Fannie Mae’s deputy chief economist.
“This major shift in consumer expectations comes in the wake of the recent rally in bond markets,” Palim said. “Notably, homeowners and higher-income households reported being more optimistic about interest rates than renters.”
The average interest rate on a 30-year fixed rate has skyrocketed since the coronavirus pandemic began. It hit record lows below 3% more than 10 times in 2020 and 2021, sparking a historic surge in home purchases and soaring prices, before more than doubling in 2022. Interest rates hit their highest in more than 20 years in October. It remained around 8% in 2023, but fell below 7% in December. But the interest rate is still twice what it was three years ago.
Ryan Paredes (R) and Ariadna Paredes view a home shown by Ryan Ratliff, a real estate sales representative with Re/Max Advance Realty, on April 20, 2023 in Cutler Bay, Florida.
Joe Radle | Getty Images News | Getty Images
Buyers are coming back. Washington, D.C.-area real estate agent Paul Legere hosted two open houses over the weekend (for homes in the $1.1 million to $1.2 million price range) and said it was the busiest he’s experienced in the last year.
“I had similar reports from my colleagues,” he added. “Even on a Saturday with pouring rain, both of us had more than a dozen groups of active shoppers who were eagerly searching for new properties, going to the market and delaying or putting their searches on hold. People were coming back.”
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Legere said he expects to see an “infusion” of inventory over the next week or two. Inventory shortages are driving up prices, another hurdle for homebuyers.
“Homeowners have repeatedly said recently that high mortgage rates are the number one reason it’s a bad time to buy or sell a home, and the outlook for mortgage rates could become more positive. ” [incentivize] “Some people are putting their homes up for sale, contributing to an increase in the supply of existing homes in the new year,” Parim said.
Demand began to increase in December as interest rates fell, according to a recent report from national real estate brokerage firm Redfin. Redfin’s Home Buyer Demand Index, a seasonally adjusted measure of applications for tours and other home buying services from Redfin agents, rose 10% month-over-month, the highest since August, according to the report. It became the standard. The pending sales amount, which indicates the number of contracts for existing homes, decreased by 3% compared to December 2022, but the decline was the smallest in the past two years.
The coming months will largely depend on both interest rates and house prices. Prices continue to rise due to a lack of supply, and if interest rates continue to fall, price increases could accelerate. The lower the interest rate, the more a potential homebuyer can afford.
Mortgage rates are expected to fall further, but that depends on the strength of the economy and inflation.
“The momentum in interest rates is as good as the trajectory of the economic indicators. So if the data continues to move the way it has been, there is no reason why rates cannot fall back into the 5% range. “We’re right that we’re going to see a recession in 2024,” Matthew Graham, chief operating officer of Mortgage News Daily, said on CNBC’s “The Exchange.” Ta.
The average interest rate on a 30-year fixed mortgage hit a recent low of 6.61% at the end of December, but has risen slightly this month to 6.76%, according to Mortgage News Daily.
