Mortgage rates have fallen again this week, after falling nearly half a percentage point last week.
According to Freddie Mac, 30-year fixed-rate mortgages averaged 6.58% in the week ending Nov. 23, up from 6.61% the week before. A year ago, the 30-year fixed interest rate was 3.10%.
Mortgage rates have been rising for most of 2022, spurred by the Federal Reserve’s unprecedented campaign to raise interest rates to tame rising inflation. But last week, rates plummeted amid reports that inflation may have finally peaked.
“This volatility makes it difficult for potential homebuyers to know when to hit the market, and that is reflected in the most recent data showing that existing home sales are slowing across all price ranges,” said Sam Khater, chief economist at Freddie Mac.
The average mortgage rate is based on mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who are down 20% and have excellent credit. But many buyers who put down less money up front or have less-than-perfect credit will pay more than the average rate.
Average weekly rates, usually released by Freddie Mac on Thursdays, are released a day early due to the Thanksgiving holiday.
Mortgage rates usually track the yield on 10-year U.S. Treasuries. When investors see or anticipate rate hikes, they make moves that drive yields higher and mortgage rates rise.
The 10-year Treasury has been fluctuating in a lower range of 3.7% to 3.85% since a pair of inflation reports were released nearly two weeks ago indicating prices rose more slowly than expected in October. That has led to a major adjustment in investor expectations about future rate hikes, said Danielle Hale, Realtor.com’s chief economist. Before that, the 10-year Treasury had risen above 4.2%.
The market may be a little too fast to celebrate the improvement in inflation, she said.
At the November meeting of the Fed, Chairman Jerome Powell pointed to the need for continued rate hikes to curb inflation.
“This could mean that mortgage rates could rise again, and that risk increases if next month’s inflation moves into the higher side,” Hale said.
While it’s hard to time the market to get low mortgage rates, many potential homebuyers see an opportunity.
“Following generally higher mortgage rates through 2022, the recent swing in favor of buyers is welcome and could save the buyer of a mid-priced home more than $100 a month compared to what they would have paid if interest rates had risen. was higher than 7% just two weeks ago,” Hale said.
As a result of the fall in mortgage rates, both purchase and refinancing applications picked up slightly last week. But refinancing activity is still more than 80% below last year’s pace, when interest rates were around 3%, according to the Mortgage Bankers Association’s weekly report.
However, with week-to-week swings in mortgage rates averaging nearly three times what they would be in a normal year and home prices still at historic highs, many potential buyers have pulled back, Hale said.
“A protracted housing shortage is keeping house prices high even as the number of homes on the market for sale has increased, and buyers and sellers may find it more difficult to match expectations regarding price,” she said.
In a separate report released Wednesday, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau reported that new home sales rose 7.5% in October from September, but are down 5.8%. decreased compared to a year ago.
While that was higher than forecast and bucking a trend of recently declining sales, it’s still less than a year ago. Housing construction has been at historic lows for a decade and builders are retreating as the housing market shows signs of slowing down.
“New home sales exceeded expectations, but a reversal of the overall downward trend is doubtful for now given high mortgage rates and builder pessimism,” said Robert Frick, a business economist at Navy Federal Credit Union.
Despite a general trend of declining sales, new home prices remain at record highs.
The median price for a newly built home was $493,000, up 15% from a year ago – the highest price on record.