Looks like mortgage rates will be going down and staying steady this year; that's what Nadia Evangelou, an economist with the National Association of REALTORS®, is saying. But we're not there yet. Right now, the 30-year fixed rate mortgage is averaging around 6.48%, according to Freddie Mac. Evangelou says that even though rates are still pretty high compared to last year, they should start to level out as inflation slows down in the next few months.
Mortgage rates have been going down since they hit 7.08% in November. Even though they're getting better, the housing market is still getting used to the higher rates. Just a year ago, the 30-year rate was around 3.22%. Sam Khater, the chief economist at Freddie Mac, says that the housing market is still feeling the effects of the high rates. He says that this week, mortgage application activity hit a 25-year low. But don't worry, Khater says that as inflation goes down, we should see mortgage rates drop in 2023
So, home buyers might be holding off for now. With the recent rate increase, it's been harder for people to afford a home. Nadia Evangelou says that you need to make almost $100,000 to be able to afford a median-priced home. That means that only about a third of all households and just 15% of renters can afford to buy right now. And most of these people are in generation X, whose median age is 51.
Even though some people can afford to buy a home, many younger people are still waiting to make a move. Sam Khater says that home buyers are waiting for rates to go down more before they buy. But, when they do, a good job market and a lot of millennial renters will help boost the market. Plus, if rates keep decreasing, people who bought a home in the past year will have a chance to refinance and get a lower rate.
Freddie Mac reported the following national averages with mortgage rates for the week ending Jan. 5:
- 30-year fixed-rate mortgages: averaged 6.48%, up from last week’s 6.42% average. A year ago, 30-year rates averaged 3.22%.
- 15-year fixed-rate mortgages: averaged 5.73%, also up from last week when they averaged 5.68%. A year ago at this time, 15-year rates averaged 2.43%.
The 2023 housing market is going to be defined by mortgage rates, and rates will be determined by what happens with inflation. The best way to keep a pulse on what experts are projecting for next year is to lean on a trusted real estate advisor. Let’s connect.