July 14th, 2023 7:00am PDT
(PenniesToSave) – Mortgage rates have recently seen an increase, reaching the highest level of the year at nearly 7%. However, experts suggest that in the upcoming weeks, rates may decrease following new inflation data.
Freddie Mac reports that the average rate for a 30-year fixed mortgage rose to 6.96%, up from last week’s 6.81%. However, experts predict that rates will decrease next week based on recent government data showing a decline in inflation, the lowest level since early 2021.
Please note that the Freddie Mac survey collects data from Thursday through Wednesday, so it may not fully capture the most recent market response to inflation data.
Based on information from Realtor.com, if the current mortgage rate stands at 6.96%, the monthly payment for a median-priced home listed at $445,000 would be around $2,565. Comparatively, when rates were at 6.81% last week, the monthly payment was slightly lower at $2,527. Please note that these calculations are based on a minimum down payment of 13%.
Rising interest rates are causing worry among prospective homebuyers. The increase in rates has discouraged homeowners from putting their houses on the market, resulting in limited availability and higher home prices.
Buyers Looking for Deals
The MBA reported that mortgage purchase demand reached its lowest point in a month towards the end of June. However, there was a small improvement during the Fourth of July weekend.
According to the Mortgage Bankers Association (MBA), there was a 2% increase in the number of purchase applications for the week ending July 7, after accounting for seasonal factors. However, this volume still remained 26% lower compared to the same week in the previous year.
According to Joel Kan, the Deputy Chief Economist at MBA, the increase in purchase activity was fueled by a surge in both FHA and VA purchase applications. These types of loans tend to be popular among first-time buyers, who currently make up a larger portion of the buyer pool. This is because “move-up buyers” are hesitant to sell their homes and lose their existing low mortgage rates.
First-time homebuyers often encounter difficulties in finding affordable homes that fall within their budgetary constraints. The limited availability of homes that match their financial capabilities presents a significant obstacle to their entry into the real estate market.
Furthermore, buyer confidence was notably low in June. According to Fannie Mae’s most recent confidence index, a significant majority of potential buyers, around 78%, viewed the current time as unfavorable for purchasing a home. Conversely, only 22% expressed optimism and considered it a good opportunity to make a purchase.
Prices Could Be at Their Highest
The scarcity of available pre-owned homes on the market has played a significant role in maintaining elevated home prices. But there is a glimmer of hope for buyers, as it seems that home prices may have finally peaked for the year.
According to data from Altos Research, the median home price in the US was $452,490 for the week ending July 10. This is slightly lower compared to the previous week’s median price of $455,000, indicating a decrease of half a percent both weekly and yearly.
According to Mike Simonsen, the CEO of Altos Research, home prices have remained fairly steady compared to the previous year. The data shows no signs of an immediate drop in prices. In a blog post, Simonsen pointed out that historically, the last week of June tends to be when home asking prices reach their highest point, and it appears that this year is following that trend.
As of July 10, Altos Research reports that there are currently 465,000 unsold single-family homes on the US market. This indicates a slight decrease from the previous week’s count of 467,000.
The latest data from the Census Bureau reveals a significant increase in construction activity for both single- and multi-family homes. In May, there was a substantial 21.7% surge, resulting in a seasonally adjusted annual rate of 1.631 million units. Moreover, permits for building and housing starts also showed month-over-month gains.
The increase in construction activity suggests that there may be more new homes available for potential buyers. This data indicates that there is a response to the market demands with the creation of additional housing options.