Buyers can give thanks for another dip in mortgage rates
Applications increased as 30-year fixed-rate mortgages declined for a fourth straight week.
Key points:
- Rates averaged 7.29% this week, dipping to the lowest level in nearly two months.
- Mortgage applications also increased from the week before, but are still 20% below last year’s levels.
- Home sales are expected to remain weak, but optimism is building for a turnaround in early 2024 if rates continue to drop.
Potential homebuyers received a holiday treat this week as mortgage interest rates declined significantly.
The 30-year fixed-rate mortgage came in at 7.29%, down from last week's 7.44%. This is the fourth straight week of declines and the lowest level in nearly two months. After hovering around 8% in October, the downward trend suggests that buyers may see rates closer to 7% before the end of the year.
Still, buyers may not be ready to act, as indicated by a continuing decline in existing home sales and low loan application levels.
"In recent weeks, rates have dropped by half a percent, but potential homebuyers continue to hold out for lower rates and more inventory," said Sam Khater, Freddie Mac's chief economist.
And despite the recent downward trend, mortgage rates are still quite elevated compared to the past 20 years, and home prices remain high, hurting affordability. For now, only the most motivated buyers are in the market — but that could change in 2024, said Danielle Hale, Realtor.com's chief economist.
"If rates can hold onto this improvement, or notch a further decline … this could mean that 'buying a home' does seem like a viable new year's resolution to a greater number of households," Hale said.
Hale noted that rates are falling during a period of mixed economic data reports, which "continue to keep investors guessing."
There has been little day-to-day movement in rates this week, according to Mortgage News Daily, which put the 30-year rate at 7.32% on Nov. 22.
The 15-year fixed-rate mortgage averaged 6.67% for the week, down from 6.76%.
Mortgage applications continued to climb, rising 3% compared to the week before, according to the Mortgage Bankers Association. That's still off by 20% compared to a year ago, however.
"Mortgage applications increased to their highest level in six weeks, but remain at very low levels," said Joel Kan, MBA's deputy chief economist. Kan noted that the average purchase loan application amount was $403,600, the lowest since January. That's a sign that more first-time homebuyers may be entering the market.