Mortgage rates fell again this week, after falling nearly half a percentage point last week.
The average 30-year fixed-rate mortgage was 6.58% in the week ended November 23, down from 6.61% in the previous week, according to Freddie Mac. A year ago, the 30-year flat rate was 3.10%.
Mortgage rates have been rising for most of 2022, spurred by the Federal Reserve’s unprecedented campaign to raise interest rates in order to tame spiraling inflation. But in the past week, interest rates have fallen amid reports that inflation has finally peaked.
“This volatility makes it difficult for potential homebuyers to know when to enter the market, and this is reflected in the latest data showing existing home sales slowing across all price points,” said Sam Khater, chief economist at Freddie Mac.
The average mortgage rate is based on the mortgage applications Freddie Mac receives from thousands of lenders across the country. The survey only includes borrowers who have given a 20% decrease and have excellent credit. But many buyers who offer less money up front or have less than perfect credit will pay more than the average price.
The weekly average rates, usually released by Freddie Mac on Thursdays, are released one day early due to the Thanksgiving holiday.
Mortgage rates tend to track the yield on the 10-year US Treasury note. As investors see or expect interest rates to rise, they make moves that send higher returns and higher mortgage rates.
The 10-year Treasury has been hovering in a lower range from 3.7% to 3.85% since a pair of inflation reports were released suggesting prices were rising at a slower-than-expected pace in October about two weeks ago. That has led to a significant reset in investors’ expectations about future rate hikes, said Danielle Hill, chief economist at Realtor.com. Before that, the 10-year Treasury note rose above 4.2%.
However, the market may be a little quick to celebrate the improvement in inflation, she said.
At the November Fed meeting, Chairman Jerome Powell pointed to the need for continued rate hikes to tame inflation.
“This could mean that mortgage rates could rise again, and that risk rises if next month’s inflation reading is on the higher side,” Hill said.
While it can be difficult to time the market for a low mortgage rate, many potential home buyers see a window of opportunity.
“After mortgage rates have generally been higher throughout 2022, the recent swing in favor of buyers is welcome and could save the average homebuyer more than $100 a month compared to what they would have paid when rates were above 7%,” Hill said.
As a result of lower mortgage rates, purchase and refinance orders rose slightly last week. But refinancing activity is still 80% below last year’s rate when rates were around 3%, according to the Association of Mortgage Banks Weekly Report.
However, with week-to-week fluctuations in mortgage rates averaging nearly three times those seen in a typical year and house prices still historically high, many would-be shoppers have dropped out, Hill said.
“The long-term housing shortage keeps home prices rising, even as more homes for sale come on the market, and buyers and sellers may find it more difficult to align expectations about price,” she said.
In a separate report released Wednesday, the US Department of Housing and Urban Development and the US Census Bureau reported that new home sales jumped in October, rising 7.5% from September, but down 5.8% from a year ago.
Although that was higher than expected and bucked the trend of lower sales recently, it was still less than a year ago. Homebuilding has been at a historic low for a decade, and builders have been holding back as the housing market shows signs of slowing.
“New home sales beat expectations, but it is questionable at this time that the overall downward trend will reverse given high mortgage rates and construction pessimism,” said Robert Fricke, corporate economist at Navy Federal Credit Union.
Despite the general trend of declining sales, new home prices remain at record levels.
The median price for a newly constructed home was $493,000, up 15% from last year – the highest price ever.