Mortgage rates drop to lowest level since last spring: Freddie Mac

Mortgage rates continued their downward trend this week and have fallen to levels not seen since last spring, according to Freddie Mac. 

The average 30-year fixed-rate mortgage was 6.6% for the week ending January 18, according to Freddie Mac’s latest Primary Mortgage Market Survey. That’s a slight decrease from the previous week when it averaged 6.66%. A year ago at this time, the 30-year fixed-rate mortgage averaged 6.15%. 

"Mortgage rates decreased this week, reaching their lowest level since May of 2023," Freddie Mac Chief Economist Sam Khater said. "This is an encouraging development for the housing market and in particular first-time homebuyers who are sensitive to changes in housing affordability. However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale."

While falling rates are a good sign for buyers, there’s still the chance they may not hold steady as the economy wobbles toward recovery. This can cause trouble for buyers trying to accurately budget for their home purchase.

"The recent fluctuations in mortgage rates pose a significant challenge for homebuyers striving to establish their purchasing budgets," Realtor.com Economist Jiayi Xu said in a release. "This challenge is particularly pronounced for first-time home buyers, who typically have a lower share of down payments, and a slight increase in mortgage rates could push them further away from realizing their dream of homeownership."

If you think you’re ready to shop around for a home loan, consider using Credible to help you easily compare interest rates from multiple lenders in minutes.

HOME BUYERS STRUGGLE IN 2023, BUT HOMEOWNERSHIP RATE COULD RISE IN 2024

Rates set to drop below 6% by end of the year

Despite the ups and downs of the mortgage industry, experts still predict a positive outcome for 2024. Fannie Mae’s Economic & Housing Outlook predicates that 30-year mortgage rates will finally drop below 6% towards the end of the year.

"We anticipate that after the past several years of extreme volatility in interest rates, the 30-year fixed rate mortgage rate will continue to moderate over the course of 2024, moving toward a rate below 6 percent by year end," Fannie Mae said. 

Historically, this is a healthy drop. After all, buyers in 1971 – when data first started being collected on mortgage rates – had rates above 7%. Those in the 1980s fared worse, as rates reached over 18%.

As rates drop, housing affordability is creeping up as well, although many households still can’t afford homes, largely due to insufficient incomes, increasing homeowners insurance rates and the costs associated with inflation.

The average mortgage payment in the U.S. in December 2023 was $2,361, according to a Redfin report. That’s $327 less than in October when payments reached an all-time high.

In all of 2023, only 15.5% of the homes on the market were affordable for an average American household. That’s a big drop from the 20.7% of affordable homes in 2022.

If you’re considering buying a home this year, a site like Credible can let you view multiple mortgage lenders and provide you with personalized rates within just minutes.

NEW CONSTRUCTION HOMES POPULAR AMONG MILLENNIALS DESPITE HIGH HOUSING COSTS

Home prices are set to fall just slightly

While homes won't yet become affordable for most buyers, home prices are set to drop in 2024, signaling the potential for a more affordable market in the future.

Redfin predicts prices falling by 1% year over year in the second and third quarters of the year when the market picks back up again in the spring. This will be one of the first time there’s been a price decline since back in 2012, in the aftermath of the Great Recession.

As prices drop, there’s likely to be a slight increase in listings, giving buyers a break from the 2023 grid-locked market. Since 3% to 4% interest rates aren’t predicted for any time soon, some homeowners will give in and decide to sell, Redfin predicts.

Costly areas like South Florida are the ones that will see the highest number of listings, Redfin agents report. This is largely due to residents listing their homes for sale as they leave for lower-cost areas.

If you’re considering taking advantage of the market’s slow recovery, visit Credible to compare rates and lenders in minutes.

THESE ARE THE MOST AFFORDABLE CITIES TO BUY A HOME IN 2024: REALTOR.COM

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