In a recent turn of events, the housing market is experiencing a mix of rising mortgage rates and increasing application volumes. According to Freddie Mac, the average 30-year fixed-rate mortgage has climbed to a significant 7.76%, a stark contrast to the lower rates seen in 2020 and 2021. Despite not reaching the historic highs of the late 1970s and early 1980s, current rates are notably high, affecting affordability for potential homeowners.
However, there was a slight respite earlier in the week when Freddie Mac's Chief Economist Sam Khater reported a decrease in the average 30-year fixed-rate mortgage to 7.5% for the week ending on Wednesday. The rate for a 15-year mortgage also dipped to 6.81%. Following this decrease, Realtor.com Economist Jiayi Xu observed a 2.5% increase in total mortgage application volumes compared with the previous week.
The Mortgage Bankers Association's (MBA) Vice President Joel Kan underscored that despite these fluctuations, affordability issues continue to constrain housing activity. For those navigating these challenging waters, strategies such as opting for a shorter-term 15-year mortgage at an average rate of 7.03% or buying mortgage points to lower interest rates are available options. With mortgage points, borrowers can pay upfront to reduce their loan's interest rate, potentially saving on monthly payments over time.
Amidst these market conditions, Zillow (NASDAQ:ZG) economist Orphe Divounguy has set expectations of reducing Treasury yields and mortgage rates in response to a slowing U.S. economy. This forecast comes as the Federal Reserve maintains its short-term policy rate within a range of 5.25% to 5.5%, with considerations for future rate hikes still on the table.
Simultaneously, home prices show no signs of decreasing, with A&D Mortgage CEO Max Slyusarchuk indicating that prices continue an upward trajectory. CoreLogic's latest insights reveal a 4.5% year-over-year increase in U.S. single-family home prices as of September.
Divounguy also pointed out that recent data revisions suggest that consumers have more excess savings than previously estimated, which could bolster consumer spending as the holiday season approaches. Despite this potential boost, affordability remains a central concern for many aspiring homeowners navigating the current economic landscape.
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