After a mostly persistent climb throughout 2022, mortgage rates have finally eased, though only slightly. While similar signs show that inflation may also loosen its grip on the economy, it is unclear whether the two are related (though they often are). Regardless of the reason, those who have been waiting for interest rates to ebb may finally have a reason to celebrate.
The National Association of Realtors adds that US home sales fell last year by 17.8%. While that still represents about 5.03 million homes sold in the US, in 2021, it was actually the weakest year of home sales since 2014. In addition, it was the biggest decline in home sales since 2008; and if you recall, that was amidst the late 2000s housing crisis.
Indeed, Freddie Mac Chief Economist Sam Khater comments, “Mortgage rates continue to tick down and, as a result, home purchase demand is thawing from the months-long freeze that gripped the housing market.”
Sure enough, the most recent data shows that the average 15-year Fixed-rate is down about 5.17%. It was 5.28% about a week ago. Of course, that is still significantly higher than the 2.80% average 15-year FRM from one year ago. In addition, the average rate on a 30-year FRM also fell this week, from 6.15% to 6.13%. Similar to the 15-year FRM, the 30-year also still has a ways to go before reaching the average rate from one year, when it was 3.55%
With both of these fundamental mortgage rates nearly twice that of last year, the housing market has been struggling in all sectors. Not only are new homebuyers finding it difficult to afford the prices but existing home sale rates have declined for at least the last 10 consecutive months.
Still, a few months of steady—albeit incremental—decline may not be enough to whip even the most enthusiastic buyers into a frenzy. Many other economic factors play a part in these decisions, and it may take some time before home sales start to rise again. For now, though, [potential] buyer outlook remains optimistic.
Khater says, “Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains fueled by first-time homebuyers.”
