Housing Market Mortgage Rates Drop

Housing Market Cover picture shows a modern house with wood and stucco siding and a flat roof.

The housing market is becoming increasingly difficult to navigate for homebuyers, who are particularly sensitive to changes in mortgage rates. However, last week rates decreased, and buyers were quick to take advantage of the opportunity to purchase homes.

According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.30% from 6.40%, with points decreasing to 0.55 from 0.59, including the origination fee, for loans with a 20% down payment. Although this was a weekly average decline, the main cause for demand was the more significant, one-day drop in the middle of the week.

Mike Fratantoni, MBA’s SVP and chief economist, stated that the job market is beginning to slow, which contributed to the 30-year fixed rate decreasing to 6.30%, the lowest it has been in two months.

Housing Market:  Mortgage Applications

As a result, mortgage applications to purchase a home rose by 8% last week compared to the previous week. However, compared to the same week one year ago, applications were 31% lower as interest rates were considerably lower at the time. Homebuyers have been faced with not only higher interest rates but also higher home prices and limited supply.

Applications to refinance home loans were less reactive and remained relatively unchanged week to week. They were also 57% lower than the same week one year ago. Given the current interest rates, there are very few borrowers who can benefit from refinancing their mortgages. Those who wish to access their home equity are choosing second loans rather than cash-out refinances.

Mortgage rates have started to increase this week and could move in either direction after the government releases its monthly report on inflation on Wednesday.

Homebuyers have become highly sensitive to mortgage rates due to the high cost of housing in today’s market. Therefore, any decrease in interest rates, such as the one last week, leads to a surge in demand. However, refinancing activity remains subdued due to the current interest rates, leading to fewer borrowers who can benefit from refinancing.

Housing Market:  Interest Rates

The real estate market can be unpredictable, and homebuyers are always looking for ways to make the most of their investments. One of the biggest considerations when buying a home is the interest rate on the mortgage. For the past few months, homebuyers have experienced a bit of a rollercoaster ride when it comes to mortgage rates. Just when they thought rates were headed back toward the 20-year high they saw in the fall, rates appear to have resumed their downward slide—but how long this trend will last is anyone’s guess.

According to Freddie Mac, mortgage rates fell for a fifth straight week following five consecutive weeks of increases. The 30-year, fixed-rate mortgage averaged 6.27% for the week ending April 13, down from 6.28% the week prior. Many housing market watchers are holding out hope that interest rates already hit their peak last year.

However, it’s important to note that rates for home loans are still caught in a tug-of-war between high inflation and the Federal Reserve’s actions to restrain inflation, which often indirectly pushes long-term mortgage rates higher. In March, the Federal Reserve raised its federal funds rate by 25 basis points to a new range between 4.75% and 5%, keeping in line with previous indications that it would continue hiking rates to contain inflation, but at smaller increases in 2023. The Fed hiked its benchmark interest rate seven times in 2022.

Housing Market:  Inflation Concerns

The Fed signaled in a statement following the March meeting that “some additional policy firming may be appropriate” to bring inflation to its target rate of 2%. Experts believe this suggests the Fed may be ready to push the pause button on tightening, especially in the wake of multiple high-profile bank failures. Additionally, inflation continues to cool, falling to 5% in March from 6% the previous month, according to the latest Consumer Price Index (CPI) report.

Even so, housing market stakeholders are keeping a watchful eye on the data-dependent Fed for signals as to whether policymakers will maintain—or cut—the benchmark rate when they meet again in May or resume more aggressive tightening measures. This uncertainty makes it difficult for homebuyers to know what to expect in the coming months.

Housing Market:  Strategy

So what’s the best strategy for prospective homebuyers in this uncertain economic climate? The answer is to be prepared to jump on a dip in rates, but only if you have a property in mind that fits your budget. Robert Frick, corporate economist at Navy Federal Credit Union, recommends being prepared to take advantage of dips in rates, but cautions that buyers should not make the mistake of purchasing a home they cannot afford just because rates are low.

It’s important to remember that interest rates are just one piece of the puzzle when it comes to buying a home. Buyers should also consider their financial situation, the state of the housing market, and the overall economy before making a purchase. If you’re in the market for a home, it’s a good idea to work with a real estate professional who can help you navigate the complexities of the market and ensure that you make an informed decision.

Housing Market:  Mortgage Rate Predictions for April 2023

The housing market in the United States has experienced a great deal of uncertainty in recent years, and many people are wondering what to expect in the coming months. One of the biggest questions on many people’s minds is what will happen to mortgage rates.

LPT. president, Robert Palmer, believes that recent drops in inflation and U.S. Treasury yields could signal that mortgage rates are at or near their peak. He thinks that rates could drop into the 5% range later in the second quarter or in the second half of 2023, but cautions that this is not guaranteed.

The Mortgage Bankers Association (MBA) believes that long-term rates have already peaked, and predicts that 30-year mortgage rates will end 2023 at 5.2%.

Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors (NAR), thinks that if inflation continues to slow down, mortgage rates may stabilize below 6% in 2023.

Freddie Mac forecasts that the average 30-year mortgage will start at 6.6% in Q1 2023 and end at 6.2% in Q4 2023.

Jiayi Xu, economist at Realtor.com, predicts that mortgage rates will move in the 6% to 7% range over the next few weeks, which will continue to pose a significant challenge to affordability.

Some economists warn that a fight over raising the debt ceiling is likely to drag into the summer, which could cause rate volatility and raise borrowing costs, including mortgage rates.

Housing Market:  Increase in Activity

Despite these concerns, some experts predict that the housing market will see more activity in the coming months. Edward Seiler, associate vice president at the MBA, believes that mortgage rates and home-price growth will soften, which should help bring more prospective buyers into the market during the spring homebuying season.

Of course, predicting mortgage rates is not an exact science, and there are many factors that could impact rates in the coming months. One of the biggest unknowns is the state of the economy, and how it will affect inflation and interest rates. The Federal Reserve will also continue to play a role in determining mortgage rates, as it seeks to balance inflation concerns with the need to support economic growth.

Overall, the consensus seems to be that mortgage rates will remain relatively high in 2023, but may drop slightly later in the year. Homebuyers should be prepared to act quickly if rates do drop, but should also be cautious about stretching their budgets too far. With so much uncertainty in the market, it’s important to be patient and keep a close eye on economic indicators and industry trends.

Housing Market:  Refinance

With mortgage rates still higher than they were a year ago, the number of mortgage applications has remained low, stuck near its lowest level in more than two decades, according to data from the Mortgage Bankers Association (MBA). However, if you’re looking to refinance your mortgage, now may be a good time to do so, depending on your financial situation and goals.

Refinancing your mortgage can lead to a lower monthly payment, but it’s important to note that not all refinancing options yield less interest over the life of the loan. For example, refinancing from a 5% mortgage with 26 years left on it to a 4% rate for 30 years could cause you to pay more than $13,000 in additional interest. So it’s important to carefully consider your options before making a decision.

One way to determine whether refinancing is a good option for you is to use a mortgage refinancing calculator, which can help you estimate your potential savings. You should also consider how long you plan on staying in your home, as the closing costs can eat up your savings if you sell shortly after refinancing. Closing costs for refinancing typically range from 2% to 5% of the loan amount, depending on the lender, so it’s important to factor these costs into your decision-making process.

Housing Market:  Rates

It’s also important to keep in mind that the rate you qualify for will depend on several factors, including your credit score, debt-to-income (DTI) ratio, loan-to-value (LTV) ratio, and proof of steady income. So before you start shopping around for a lender, it’s a good idea to check your credit score and ensure that your finances are in order.

In terms of current mortgage rate trends, the average mortgage rate for a 30-year fixed is 6.89%, nearly double its 3.22% level in early 2022. The average cost of a 15-year, fixed-rate mortgage has also surged to 6.18%, compared to 2.43% in January 2022. However, in the current environment, adjustable-rate mortgages (ARMs) might be more affordable than those with fixed rates. The latest average for a 5/1 ARM was 5.65%.

While refinancing can be a good option for some homeowners, it’s important to carefully consider your financial situation and goals before making a decision. Factors to consider include your credit score, DTI ratio, LTV ratio, and proof of steady income, as well as the potential savings and closing costs associated with refinancing. By taking these factors into account, you can make an informed decision about whether refinancing is right for you.

Housing Market:  Conclusion

In conclusion, the housing market has been experiencing significant changes in interest rates, with homebuyers reacting sensitively to any decrease in rates. While mortgage rates decreased last week, resulting in an increase in mortgage applications to purchase homes, applications to refinance remained relatively unchanged due to current interest rates. The Federal Reserve’s actions to restrain inflation and high inflation rates are still contributing factors that may indirectly push long-term mortgage rates higher. The real estate market remains a complex world to navigate, but with knowledge of the latest trends and developments, homebuyers can make informed decisions about their investments.

If you are looking to buy a home in St Petersburg or Tampa FL, Click Here to get in touch with Avalon Group Top Rated Realtor Team.  To get pre-approved for a home loan, click here to fill out the online loan application with our preferred lender, Ashley Bedford.

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About the Author

Raised in a family of creative entrepreneurs, Aaron Hunt, Realtor St Petersburg FL, guides his clients with the same irrepressible spirit he was surrounded by as a kid. A Florida transplant, Aaron relates well to the out-of-state buyers, retirees, and vacation home-dwellers who make up the bulk of his clientele. He makes no secret of his love for St. Petersburg and its neighboring cities and towns, and it fuels his passion for helping buyers find their dream home.

Originally from the San Francisco Bay Area, Aaron grew up on the West Coast. His family owns hotels throughout California, Idaho, and Las Vegas, which has shaped Aaron’s eye for detail and his mind for business. In his subsequent career in the spa industry, he established a high bar for client service designed to cater to every discerning taste. From pampering spa customers to tending to real estate clients, Aaron knows how to take care of people.

Realtor St Petersburg FL:  Exceeding Expectations

By limiting the number of clients he represents at any given time, he ensures his undivided attention, absorbing every detail so he can deliver outstanding results and exceed expectations. Aaron co-founded Avalon Group, Realtor St Petersburg FL, in 2014 and grew it into the top-rated real estate team in St. Petersburg and Tampa Bay out of over 10,000 agents. Some of Aaron's greatest strengths are organizing and leading complex projects, making deals happen, and driving profit.

Aaron negotiates deftly for his buyers’ ideal homes.  Furthermore,  he attracts multiple enticing offers for his sellers’ properties.   Aaron prepares meticulously for every transaction, thoroughly covering every detail so clients encounter no surprise. He also relies on his dynamic support team and vast professional network to ease every facet of a transaction.  Additionally he makes sure to fulfill specific client needs. Aaron, a broker associate and Pricing Strategy Advisor, satisfies his competitive streak when everyone wins.

Realtor St Petersburg FL:  Living the Tampa Bay Lifestyle

Aaron has been a proud Florida resident since 2013. There’s always something interesting to do in St. Petersburg, and Aaron relishes it, exploring the city, traveling, hiking, biking, and visiting with friends. He also enjoys trying new restaurants in the region, especially in neighborhoods where he has homes listed. Aaron takes time to give back to his community by supporting St. Pete Pride and other annual festivals throughout the area.