For the first time since August, mortgage rates have surpassed the 6% range, and numerous housing economists anticipate that this trend will likely continue.
The average 30-year mortgage rate decreased from 7.03% the previous week to 6.95% on Thursday, as reported by Freddie Mac. After falling for the seventh consecutive week, rates reached their lowest level since early August, when they stood at 6.96 percent.
As a result of optimistic data on overall inflation, housing analysts anticipate imminent reductions in mortgage rates that will bring them even closer to 6%. This would assist the sluggish and pricey US housing market, which has deterred many prospective purchasers and homeowners over the past year.
Sam Khater, chief economist at Freddie Mac, stated in a press release, “Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds target rate next year, we will likely observe a gradual thawing of the housing market in the new year.”
Data on the CPI indicate future rate decreases
Inflation moderated to 3.1% year-over-year in November, according to the most recent Consumer Price Index (CPI) data. This is encouraging for the housing market as the Federal Reserve approaches its target inflation rate of 2%.
Homeowners and sellers have been mired in a market impasse since financing rates skyrocketed last summer. In an effort to maintain their low interest rates, owners are hesitant to sell, and the majority of buyers are unable to afford the additional financing cost; as a result, the volume of pending home transactions has reached its lowest level in two decades.
“Federal Chair Jerome Powell stated at Wednesday’s FOMC meeting, ‘After picking up slightly over the summer, activity in the housing sector has leveled off and remains well below levels of a year ago, largely reflecting higher mortgage rates.'”
However, this may shortly change, as housing analysts predict interest rate reductions in 2024. According to Lawrence Yun, chief economist at the National Association of Realtors (NAR), the Federal Reserve may begin reducing interest rates as early as the spring and may do so by the end of the following year. A 100 basis point reduction would bring average mortgage rates to approximately 6.3%.
