The final month of 2022 offered a promising turnaround as mortgage rates started to fall in November. That peak marked the end of the weakest year for overall home sales since 2014, totaling only 5.03 million. This marks a decline of nearly 18% from the previous year. Unfortunately, one month of decline is about all we are going to get as the same mortgage rates ticked up the first week of February.
Specifically, the average 30-year fixed mortgage rate increased from 6.09% in the final week of January to 6.12% in the first week of February. By comparison, this rate was only 3.69% one year ago, according to mortgage buyer Freddie Mac. Similarly, the average rate for a 15-year fixed mortgage grew from 5.14% to 5.25% in the same time frame. This is also up from the year prior when this rate was 2.93%. Of course, neither of these is near the long-term rate average of 7.08%—a 20-year high—which was registered in the fall of 2022.
Freddie Mac Chief Economist Sam Khater explains that while the Federal Reserve issued another interest rate hike—which typically elevates recession risk—one thing, in particular, has contributed to the recent bump. Effectively, a strong jobs report suggests that buyers may start to have more money to invest in a [future] home purchase.
In other words, while a potential upward trend in mortgage rates certainly implies that homes will get more expensive again, it could also represent new stability. This, in turn, could help encourage more interest in home buying right in time for Spring, which is traditionally a decent home-buying season. After all, mortgage applications are up 3% on the week. In addition, refinancing applications jumped 18% in the same period.
But the latest news is not necessarily the end-all to this matter. The Fed also issued its eighth consecutive interest rate hike in less than a year, pushing the central bank’s core metric up from 4.5% to 4.75%. This will continue to complicate lending matters. On top of that, Fed Chair Jerome Powell has expressed that we could see at least two more quarter-point rate increases within the next year. Time will tell, then, if the slight shifts we’ve seen in February will make any long-term impact on housing data.
