Uncommon Knowledge
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A sluggish housing market for most of last year began to heat up as the calendar turned to 2024.
In recent weeks, however, the market has cooled once again.
A surge in mortgage rates accounts for the slowdown in the housing market, experts told ABC News, pointing to elevated home prices pushed out of reach for most consumers when combined with high borrowing costs.
The jump in mortgage rates is due to stubbornly high inflation that has delayed interest rate cuts at the Federal Reserve, experts said. Mortgage rates track yields on 10-year treasury bonds, which are highly sensitive to the Fed’s benchmark rate.
“High mortgage rates and high housing prices have led to an affordability problem of a dimension that we haven’t seen in decades,” Susan Wachter, a professor of real estate at University of Pennsylvania’s Wharton School of Business, told ABC News.
The average interest rate for a 30-year fixed mortgage has soared to 6.9%, rebounding after a steady decline at the end of last year, according to a report from Freddie Mac on Thursday.
Meanwhile, home sales have plummeted. Mortgage-purchase applications fell 10% from a week earlier, data from the Mortgage Bankers Association on Wednesday showed.
“Existing home sales have fallen off a cliff,” Lu Liu, also a professor at the Wharton School at the University of Pennsylvania, told ABC News.
The housing market dynamic traces back to a highly anticipated announcement in December, during which the central bank revealed expectations of interest rate cuts in 2024.
The signal elicited a boost of optimism among key market players, who foresaw the end of the Fed’s fight against inflation and the decline of interest rates from near-historic highs. In turn, yields fell on 10-year treasury bonds, and mortgage rates soon followed suit.
Inflation, however, has refused to cooperate. Stronger than expected economic performance and resilient consumer demand have helped buoy price increases, keeping them above the Fed’s target rate.
“The strengthening of the economy is a surprise,” Wachter said. “It does raise questions about the Fed’s next steps.”
Consumer prices rose 3.1% in January compared to a year ago, slowing markedly from the previous month but missing expectations of an even larger cooldown, a report from the Bureau of Labor Statistics earlier this month showed.
Inflation stands well below a peak of 9% last year but remains more than a percentage point above the Fed’s target rate of 2%.
“The inflation rate is reflected in the 10-year treasury rate, which pushes mortgages up,” Wachter said.
When the Fed initiated the rise of bond yields with its first rate hike of the current series in March 2022, the average 30-year fixed mortgage rate stood at just 4.45%. The average mortgage is now nearly 2.5 percentage points higher.
Each percentage point increase in a mortgage rate can add thousands of dollars, or even tens of thousands, in additional costs each year, depending on the price of the house, according to Rocket Mortgage.
The rising mortgage rates have put a freeze on the housing market in part because home prices remain high, Liu said. Potential homebuyers would rather stick with mortgages that have comparatively low rates rather than shift to higher rates that would compound the elevated home prices, she added.
“A lot of people are holding back from moving or selling,” Liu said.
Observers would expect home prices to fall amid low consumer demand, but the stubbornly high housing costs may be owed to that reluctance among prospective homebuyers to first put their own homes up for sale, Liu added.
“It’s a little bit of a puzzle why home prices have remained stable or even ticked up,” Liu said. “Home owners may be buying, but they’re not selling.”
Source: abcnews.go.com
Mortgage rates rose for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans moved higher.
Mortgage rates could gradually come down this year, according to Greg McBride, CFA, Bankrate chief financial analyst. As the Federal Reserve stopped raising rates in 2023, mortgages rates started to drop at the end of Q4. At its Jan. 31 meeting, the central bank announced it would hold off changing rates and pointed to three rate cuts this year. Rate hikes and cuts affect many areas of the economy, including the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says McBride. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates as of February 14, 2024.
The rates listed above are averages based on the assumptions here. Actual rates available within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, February 14th, 2024 at 7:30 a.m.
The average rate for a 30-year fixed mortgage for today is 7.25 percent, up 15 basis points over the last week. Last month on the 14th, the average rate on a 30-year fixed mortgage was lower, at 7.01 percent.
At the current average rate, you’ll pay principal and interest of $682.18 for every $100,000 you borrow. That’s an additional $10.15 per $100,000 compared to last week.
The 30-year mortgage is the most popular option for borrowers. It has a number of advantages. Among them:
The average rate for the benchmark 15-year fixed mortgage is 6.61 percent, up 13 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $877 per $100,000 borrowed. The bigger payment may be a little tougher to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much faster.
The average rate on a 5/1 ARM is 6.14 percent, rising 3 basis points over the last week.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These types of loans are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.14 percent would cost about $609 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
The average rate you’ll pay for a jumbo mortgage is 7.32 percent, up 16 basis points over the last week. This time a month ago, the average rate for jumbo mortgages was lesser at 7.06 percent.
At the current average rate, you’ll pay a combined $686.93 per month in principal and interest for every $100,000 you borrow. That’s up $10.85 from what it would have been last week.
The average 30-year fixed-refinance rate is 7.28 percent, up 9 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower at 7.22 percent.
At the current average rate, you’ll pay $684.21 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $6.10 higher.
At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t expect rates to change drastically anytime soon.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t count on mortgage rates plummeting in the near future.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”
The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves. These broader factors influence overall rate movement. The specific rate you’d qualify for is tied to your credit score, loan type and other variables.
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
To help you uncover the best deal, get at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Source: bankrate.com
It’s no secret that 2023 was a difficult year to buy a home. With mortgage rates briefly topping 8% and home prices breaking records throughout the year, many would-be sellers simply decided not to bother listing their homes, exacerbating already tight inventories.
New data from the U.S. Census Bureau published last week shows how drastically housing inventory has changed since 2020, while weekly data from Altos Research offers some insights on where it goes from here.
Census Bureau data on housing inventory estimates details two cycles this decade – the onset of the pandemic and the rise of interest rates – that have been catastrophic for the nation’s for-sale housing inventory.
The onset of the pandemic and government lockdowns sparked a frenzy for homes, especially those away from crowded downtowns and with ample space for home offices and homeschooling. Prospective homebuyers were armed with low interest rates, paused student loan payments and stimulus checks.
The number of owner-occupied homes skyrocketed, quickly depleting the number of vacant for-sale homes. Renters occupied fewer homes, and fewer vacant homes were reserved for them.
The number of homes “held off market” – second homes, vacation homes and others that are neither for-sale, for-rent or occupied – shrank. This could be because their owners snagged profits amid rapidly rising prices, because those who can afford second homes paused buying, or a combination of the two.
Seasonal housing, too, dropped considerably. This is likely due to the fact that seasonal housing – defined as homes intended for periodic occupancy such as for holiday resort guests or farm workers – could be profitably sold to meet soaring homebuyer demand and was not needed during the pandemic’s travel restrictions and weak travel demand.
Most of the trends begun in 2020 continued in 2021 except for renter-occupied homes, which rose above 2019 levels in the second half of the year. This was likely a reflection of the prolonged decline in vacant homes for sale, which made it difficult for would-be buyers to find a home to purchase.
Many of the same pandemic forces that set off the homebuying frenzy also fueled a frenetic pace of inflation. In 2022, the Federal Reserve began taking action to combat these market forces by raising interest rates, starting the second cycle of inventory changes.
Over two years, the Federal Reserve hiked rates 11 times for a total increase of 5.25 percentage points, the fastest pace of hikes in four decades. It has held rates at an effective rate of 5.33% in every meeting of the Federal Reserve Open Markets Committee since July 2023, including in their meeting last week.
Mortgage rates followed suit, walloping buyers’ purchasing power. The sudden run-up in rates discouraged would-be sellers from listing their homes, as they would be faced with much higher monthly payments for the same size home were they to sell and buy another home – if they even qualified for the same size home as they currently own.
This squeezed inventory even further throughout 2022 and 2023, pushing home prices to record highs month after month.
The high-rate environment further pushed owner occupancy up while pushing homes held off market, seasonal housing and homes vacant for sale down. That the number of owner-occupied homes rose throughout 2023 – an abysmal year for home sales – shows just how tightly recent homebuyers are holding onto their low rates.
High rates, combined with low for-sale inventories and high home prices, have also resulted in a surge in home renters. There were nearly 2 million more renter-occupied homes in the fourth quarter of 2023 than in the same quarter of 2019.
The environment has also prompted many homeowners to list their homes for rent rather than sale. The number of homes vacant for rent in the fourth quarter of 2023 was up 4% since the same quarter five years ago, while the number of homes vacant for sale was down 36%.
The extremes of the 2020s have dealt big blows to for-sale inventories. First the 2020-2021 housing frenzy took a big bite out of existing inventories, then the 2022-2023 streak of rate hikes kept would-be sellers from replenishing those inventories.
The 2020s have also seen for-sale inventory siphoned from second homes, vacation homes and seasonal homes. Homebuilders, too, have added to for-sale inventory, pushing the total number of homes in the U.S. up 8.7% since the fourth quarter of 2018. But none of these valves have alleviated the shortage of for-sale homes or the resultant high home prices.
The majority of homes that would be up for sale are being held by owners with low mortgage rates who would rather stay put or rent than sell, a phenomenon known as the “mortgage rate lockdown.” Plus, boomers are aging in place for longer, further depleting available housing stock. In fact, the number of owner-occupied homes is at an all-time high, while the percentage of homes that are owner-occupied is well above pre-pandemic levels.
The only apparent change that could induce significant for-sale inventory back into the market, then, is lower mortgage rates. How quickly would sellers return if rates were lower? We got an early test in December and January when the FOMC forecasted rate cuts in 2024.
As rates began falling steeply from October through December and hovered around 6.6% in January, new listings increased on a year-to-year basis in 14 of 15 weeks, according to data from Altos Research, which, like HousingWire, is owned by HW Media.
The data is an encouraging sign that owners with homes to sell will be responsive to mortgage rates, suggesting rate cuts this year could bring about a rapid uptick in homes for sale.
Less encouraging, however, is how soon the market might see rate cuts. Mortgage rates rose above 7% this week for the first time in 2024 following a strong jobs report and comments by Federal Reserve Chairman Jerome Powell that suggested cuts were less imminent than many bond and equity traders had assumed.
Source: housingwire.com
Mortgage interest rates were mostly down compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 5/1 ARMs and jumbo loans decreased, while rates for 15-year fixed mortgages increased.
Mortgage rates could gradually come down this year, according to Greg McBride, CFA, Bankrate chief financial analyst. Mortgage rates cooled at the tail end of 2023 with the Federal Reserve pausing its campaign of rate hikes to tame inflation. The central bank now expects to cut rates in 2024 — a direction that would affect many areas of the economy, including on the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says McBride. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates accurate as of January 31, 2024.
The rates listed here are averages based on the assumptions here. Actual rates displayed on-site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, January 31st, 2024 at 7:30 a.m.
The average rate you’ll pay for a 30-year fixed mortgage today is 6.96 percent, down 7 basis points from a week ago. This time a month ago, the average rate on a 30-year fixed mortgage was higher, at 7.06 percent.
At the current average rate, you’ll pay $662.62 per month in principal and interest for every $100,000 you borrow. That’s down $4.70 from what it would have been last week.
Use Bankrate’s mortgage rate calculator to estimate your monthly payments and see how much you’ll save by adding extra payments. The tool will also help you calculate how much interest you’ll pay over the life of your loan.
The average rate for a 15-year fixed mortgage is 6.49 percent, up 1 basis point since the same time last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $871 per $100,000 borrowed. The bigger payment may be a little tougher to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more quickly.
The average rate on a 5/1 adjustable rate mortgage is 6.12 percent, ticking down 1 basis point from a week ago.
Adjustable-rate mortgages, or ARMs, are mortgage loans that come with a floating interest rate. In other words, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These loan types are best for people who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.12 percent would cost about $607 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.
The average rate for the benchmark jumbo mortgage is 7.00 percent, down 6 basis points over the last week. A month ago, the average rate for jumbo mortgages was greater than 7.00, at 7.13 percent.
At the average rate today for a jumbo loan, you’ll pay a combined $665.30 per month in principal and interest for every $100,000 you borrow. That’s $4.04 lower, compared with last week.
The average 30-year fixed-refinance rate is 7.16 percent, down 2 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was higher, at 7.21 percent.
At the current average rate, you’ll pay $676.08 per month in principal and interest for every $100,000 you borrow. That’s $1.35 lower, compared with last week.
The Federal Reserve has signaled that it intends to cut rates in 2024, depending on inflation and employment data and other factors. The Fed meets again on Jan. 31.
As of mid-January, the average 30-year fixed rate mortgage sits at just under 7 percent. As the year progresses, expect rates to slowly trend downward, says McBride.
“Mortgage rates will spend the bulk of the year in the 6s, with movement below 6 percent confined to the back half of the year,” says McBride.
The rates on 30-year mortgages mostly follow the 10-year treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves. These broader factors influence overall rate movement. As a borrower, you could be quoted a higher or lower rate compared to the trend.
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent any time soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
Keep in mind: You could save thousands over the life of your mortgage by getting at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Source: bankrate.com
National mortgage rates were mostly down compared to a week ago, according to rates data collected by Bankrate. Average rates for 30-year fixed, 5/1 ARMs and jumbo loans receded, while rates for 15-year mortgages increased.
Mortgage rates could gradually come down this year, according to Greg McBride, CFA, Bankrate chief financial analyst. Rates began retreating in the back half of 2023 as inflation continued to cool and the Federal Reserve halted rate increases. The central bank now forecasts rate cuts in 2024 — a move that would have broad economic impact, including on the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says McBride. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates accurate as of January 29, 2024.
The rates listed here are marketplace averages based on the assumptions shown here. Actual rates available on-site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Monday, January 29th, 2024 at 7:30 a.m.
The average rate you’ll pay for a 30-year fixed mortgage today is 6.99 percent, down 4 basis points over the last week. Last month on the 29th, the average rate on a 30-year fixed mortgage was unchanged, at 6.99 percent.
At the current average rate, you’ll pay principal and interest of $664.63 for every $100,000 you borrow. That’s down $2.69 from what it would have been last week.
The 30-year mortgage is the most popular home loan, and it has a number of advantages. Among them:
The average rate for the benchmark 15-year fixed mortgage is 6.50 percent, up 1 basis point over the last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost approximately $871 per $100,000 borrowed. The bigger payment may be a little harder to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much faster.
The average rate on a 5/1 ARM is 6.12 percent, down 26 basis points over the last week.
Adjustable-rate mortgages, or ARMs, are mortgage loans that come with a floating interest rate. In other words, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These types of loans are best for people who expect to refinance or sell before the first or second adjustment. Rates could be materially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.12 percent would cost about $607 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
The average jumbo mortgage rate today is 7.02 percent, down 5 basis points from a week ago. A month ago, the average rate was above that, at 7.05 percent.
At the average rate today for a jumbo loan, you’ll pay a combined $666.65 per month in principal and interest for every $100,000 you borrow. That represents a decline of $3.36 over what it would have been last week.
The average 30-year fixed-refinance rate is 7.19 percent, down 3 basis points over the last seven days. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.14 percent.
At the current average rate, you’ll pay $678.11 per month in principal and interest for every $100,000 you borrow. That’s a decline of $2.03 from last week.
The Federal Reserve has signaled that it intends to cut rates in 2024, depending on inflation and employment data and other factors. The Fed meets again on Jan. 31.
Current average 30-year mortgage rates are slightly below 7 percent as of mid-January. As the year progresses, expect rates to slowly trend downward, says McBride.
“Mortgage rates will spend the bulk of the year in the 6s, with movement below 6 percent confined to the back half of the year,” says McBride.
The rates on 30-year mortgages mostly follow the 10-year treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves. These broader factors influence overall rate movement. The specific rate you’d qualify for is tied to your credit score, loan type and other variables.
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent any time soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
You could save serious money on interest by getting at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Source: bankrate.com
“Long-term” is a subjective measurement, but in this case, it refers to the the past 7 or 8 months. Today’s mortgage rates dropped to levels that–until 2 other recent days in late December–haven’t been seen since May, 2023. In other words, we’re effectively at 8 month lows today, even if those lows aren’t very different from the lows in late December.
This week’s precipitous drop came courtesy of factors other than the slate of economic data. That’s interesting because we’d been eagerly anticipating this week’s econ data as a potential source of volatility. Instead, it was a friendly update from the U.S. Treasury on its borrowing plans (something that can have a big, indirect impact on mortgage rates by altering the supply/demand equation in the Treasury market which then spills over into the mortgage market).
All of the above means that Friday morning’s jobs report is our first significant opportunity to see a big move in rates that’s driven by economic data. As is always the case ahead of this report, the reaction could easily take rates quite a bit higher or lower. It can also thread the needle and keep things fairly flat.
The market is expecting the job count to drop to 180k from last month’s 216k. A lower number would likely keep low rates intact, and a much lower number would allow for new longer-term lows. Conversely, a number over 200k would be more likely to put upward pressure on rates. It’s not uncommon for the actual number to come in roughly 100k away from the forecast level. The farther from forecast, the likely we are to see the big reaction.
Source: mortgagenewsdaily.com
A strong U.S. economy will be a boon for the housing market, Mortgage Bankers Association’s (MBA) chief economist said on Thursday, as it will buoy demand and as inflation continues to fall, mortgage rates will decline as well making home loans more affordable for buyers.
The U.S. economy accelerated at a faster-than-expected clip in the fourth quarter of 2023 at 3.3 percent, the Commerce Department’s Bureau of Economic Analysis revealed on Thursday.
Meanwhile, the personal consumption expenditures (PCE) price index—the Federal Reserve’s preferred measurement of inflation’s progress—jumped by 1.7 percent during the quarter. Core PCE, which excludes the often volatile food and energy prices, increased by 2 percent.
These dynamics bode well for the housing market that has been struggling under the weight of record-high mortgage rates, sparked in part by the Fed’s hiking of rate at the most aggressive clip since the 1980s to fight soaring inflation.
The Fed’s funds rate currently sits at 5.25 to 5.5 percent—the highest they have been in two decades—and policymakers have signaled that they will slash rates should inflation come down to their 2 percent target.
But an economy that may avoid a recession as inflation moderates without the Fed’s tight monetary policy doing too much damage to the jobs market would help the housing sector.
“Stronger economic growth will benefit the housing market, keeping demand robust,” Mike Fratantoni, MBA’s chief economist, said in a statement shared with Newsweek. “Moreover, today’s report also showed further reductions in inflation, which will enable the Federal Reserve to cut rates later this year—as they have been hinting.”
Mortgage rates ticked up slightly for the week ending January 25, Freddie Mac said on Thursday, with the 30-year fixed rate averaging 6.69 percent.
“The 30-year fixed-rate has remained within a very narrow range over the last month, settling in at 6.69% this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement.
Rates look to have stabilized, Khater suggested, encouraging buyers to jump off the fence.
“Despite persistent inventory challenges, we anticipate a busier spring homebuying season than 2023, with home prices continuing to increase at a steady pace,” he said.
A slowdown in rates could have a negative impact on home buyers, some analysts say.
A decline in the cost of home loans would encourage more purchases, and this increase in demand will spark competition at a time when there is a limited supply of homes for sale.
More buyers who can afford mortgages entering the market will push up prices, analysts from Goldman Sachs said this week.
The investment bank’s experts project prices to soar by 5 percent in 2024, a marked revision from their earlier expectation of a 2 percent jump. That trend will continue through next year when prices are forecast to increase by nearly 4 percent, which is also a change from a previously estimated increase of close to 3 percent.
Amid the price increases, Goldman Sachs analysts anticipate that rates will fall to 6.63 percent for the year. This drop in rates from the near 8 percent highs of November 2023, will make house loans more affordable, sparking more demand for properties.
“We have very low inventory of houses for sale, which is generally supportive of prices, along with generally stable demand that is coming from things like household formation,” Roger Ashworth, senior strategist on the structured credit team at Goldman Sachs, said this week.
On Thursday, new home sales climbed up by 8 percent in December, according to government data, while prices declined to two-year lows. The fall in prices and a rise in sales was partly due to builders offering inducements to buyers, according to Yelena Maleyev, a senior economist at KPMG.
“Builders have pivoted to building smaller homes and offering more discounts and concessions, such as mortgage rate buydowns, to bring in buyers sidelined by rising mortgage rates,” she said in a note shared with Newsweek.
But the data from the U.S. Census Bureau also showed that inventory of newly built homes fell last month after going up the previous months. There were 453,000 houses available for sale at the end of December, which accounts for 8.2 months’ worth of supply.
This constituted a 3.5 percent decline from the same time a year ago, Maleyev pointed out.
The lack of inventory also comes at a time when the used homes market has struggled. Sales are down in that segment amid a lack of supply of homes as sellers are reluctant to give up their low rates for new home loans hovering in the mid-6 percent.
This lack of supply will be key to how prices shake out and the outlook for the year is not encouraging.
“If mortgage rates fall below 6 [percent] in 2024, more owners will feel comfortable listing their homes for sale, alleviating some of the shortages, but not enough to close the supply gap,” Maleyev said.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
Mortgage interest rates were mostly up compared to a week ago, according to rate data compiled by Bankrate. Average rates for 30-year fixed, 15-year fixed and jumbo loans moved higher, while 5/1 ARM rates declined.
Mortgage rates could gradually come down this year, according to Greg McBride, CFA, Bankrate chief financial analyst. As the Federal Reserve stopped raising rates in 2023, mortgages rates started to drop at the end of Q4. The central bank now may start to cut rates in 2024 — a move that would have broad economic impact, including on the 10-year Treasury, the primary influencer of fixed mortgage rates.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says McBride. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates accurate as of January 25, 2024.
These rates are averages based on the assumptions indicated here. Actual rates available on-site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Thursday, January 25th, 2024 at 7:30 a.m.
The average rate for a 30-year fixed mortgage for today is 7.03 percent, up 2 basis points over the last week. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 6.95 percent.
At the current average rate, you’ll pay $667.32 per month in principal and interest for every $100,000 you borrow. That’s $1.35 higher compared with last week.
Use our mortgage calculator to estimate your monthly payments and see how much you’ll save by adding extra payments. This calculator will also help you calculate how much interest you’ll pay over the life of the loan.
The average rate for the benchmark 15-year fixed mortgage is 6.47 percent, up 3 basis points over the last seven days.
Monthly payments on a 15-year fixed mortgage at that rate will cost $869 per $100,000 borrowed. The bigger payment may be a little harder to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much faster.
The average rate on a 5/1 ARM is 6.13 percent, ticking down 24 basis points since the same time last week.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be much higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.13 percent would cost about $608 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.
The current average rate you’ll pay for jumbo mortgages is 7.07 percent, up 1 basis point since the same time last week. Last month on the 25th, the average rate was lower, at 7.00 percent.
At the current average rate, you’ll pay a combined $670.01 per month in principal and interest for every $100,000 you borrow. That’s an additional $0.67 per $100,000 compared to last week.
The average 30-year fixed-refinance rate is 7.17 percent, down 5 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower, at 7.09 percent.
At the current average rate, you’ll pay $676.76 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $3.38 lower.
The Federal Reserve has signaled that it intends to cut rates in 2024, depending on inflation and employment data and other factors. The Fed meets again on Jan. 31.
Current average 30-year mortgage rates are slightly below 7 percent as of mid-January. As the year progresses, expect rates to slowly trend downward, says McBride.
“Mortgage rates will spend the bulk of the year in the 6s, with movement below 6 percent confined to the back half of the year,” says McBride.
The rates on 30-year mortgages mostly follow the 10-year treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves. These broader factors influence overall rate movement. As a borrower, you could be quoted a higher or lower rate compared to the trend.
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent any time soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
To help you uncover the best deal, get at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Source: bankrate.com
Thu, Jan 18 2024, 3:50 PM
Simple, Logical Cause and Effect
Things have been fairly boring for the bond market recently. We’re in a holding pattern along with the Fed where the most abject threats from economic data have subsided, but where clear confirmation of lower rate momentum has yet to materialize. Said confirmation could only come from consistently weaker economic data. Inflation is the most important data, but the labor market is also always a consideration. Today’s labor market data involved the strongest weekly reading for jobless claims in well over a year. Thankfully for fans of low rates, this data isn’t a major market mover. That said, it was a logical market mover today, immediately nudging yields up to new 5-week highs.
08:45 AM
sideways to a hair stronger overnight, but now weaker after data. 10yr up 1.7bps at 4.123. MBS down 3 ticks (.09)
11:44 AM
Some resilience after the 9:30am NYSE open, but back to weaker territory now. 10s up 3.2bps at 4.138. MBS unchanged.
02:36 PM
Treasuries bounce back modestly, but still up 2.6bps on the day at 4.132. MBS down only 1 tick (0.03).
Download our mobile app to get alerts for MBS Commentary and streaming MBS and Treasury prices.
Source: mortgagenewsdaily.com
Rates have been gradually rising across the board in the past few weeks and mortgage rates are no exception. Yesterday, it was the market responding negatively to comments from Fed’s Waller. Today it was a negative response to positive economic data.
The whole notion of “bad is good” is an ever-present paradox for fans of low rates. Rates are based on bonds and bonds do better when the economy is slow and inflation is low.
Today’s Retail Sales report showed stronger consumer spending in December (even after adjusting for holiday spending and inflation). More spending runs the risk of creating more inflation, or at least of preventing further declines in inflation. Because inflation is the main reason that rates are as high as they are, a negative reaction in the bond market was the logical outcome.
The jump in mortgage rates over the past two days has been a bit bigger than other recent increases. It takes the average lender back into territory best described as “high 6’s” for a top tier conventional 30yr fixed rate. It doesn’t necessarily mean the bad times will continue, but the market does look to be circling the wagons in this territory and considering whether the recent optimism for lower rates possible got a bit ahead of itself.
Source: mortgagenewsdaily.com