Fluctuating mortgage rates drive volatility in US housing market – Freddie Mac

Freddie Mac reveals new changes in long-term rates

Fluctuating mortgage rates drive volatility in US housing market – Freddie Mac

The US housing market remains in a state of flux, with mortgage rates seesawing and driving changes in purchase demand, according to Freddie Mac’s latest Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage (FRM) averaged 6.33% as of January 12, 2023. This marks a decrease from last week’s average of 6.48%.

Compared to a year ago, the 30-year FRM has seen a significant increase in rates. In January 2022, the average 30-year FRM was at 3.45%. Similarly, the 15-year fixed-rate mortgage has also seen a rise, currently averaging 5.52% compared to 2.62% a year ago.

Despite the latest decline in mortgage rates, the market remains highly sensitive to rate movements, with purchase demand experiencing significant swings in response to small rate changes, according to Freddie Mac chief economist Sam Khater. “Over the last few weeks, latent demand has been on display with buyers jumping in and out of the market as rates move,” Khater said.

Read more: Historical mortgage rates in the USA: Highest High and Lowest Lows

The Mortgage Bankers Association reported Wednesday that applications for home purchase loans dropped 1% week over week, while refinance application activity rose 5%.

According to Fannie Mae’s Home Purchase Sentiment Index (HPSI), consumers have expressed growing expectations that mortgage rates and home prices may decline in 2023 – perhaps influenced by easing mortgage rates and home prices observed in recent months.

“However, the HPSI remains very low by historical standards, particularly the ‘good time to buy’ component, and respondents continue to cite high home prices and unfavorable mortgage rates as the primary reasons for their pessimism,” said Doug Duncan, Fannie Mae’s chief economist. “As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices – from the perspective of the buyer – may not produce sufficient purchasing power. At the same time, existing homeowners may continue to wait to list their properties since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable. We think the resulting tension will contribute to a continued decline in home sales in the coming months.”

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