Economist: Mortgage Rates Will Dip Below 6% Soon
After doubling from a year ago, rates likely will experience less volatility in 2023, says NAR Director of Forecasting Nadia Evangelou.
Mortgage rates likely will settle below 6% and experience less volatility this year, predicts Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®. But we’re not there yet: The 30-year fixed-rate mortgage averaged 6.48% this week, according to Freddie Mac. “Although rates remain more than double a year ago, they will likely stabilize as inflation will continue to slow down in the coming months,” Evangelou says.
Mortgage rates have been pulling back ever since surging to a 7.08% average in November. But the housing market may still be adjusting to higher rates; a year ago, the 30-year rate averaged 3.22%. “Mortgage application activity sunk to a quarter-century low this week as high mortgage rates continue to weaken the housing market,” says Sam Khater, Freddie Mac’s chief economist. “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”
Until then, home buyers may be in wait-and-see mode. Affordability has been hammered by higher rates in recent months. Evangelou says the qualifying income for homeownership is now near the $100,000 threshold, which means only 32% of all households and 15% of all renters can afford to buy a median-priced home. The majority of these households are Gen Xers, whose median age is 51, she adds.
But many aspiring buyers from younger generations are still waiting to jump in. “Home buyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of millennial renters will provide support to the purchase market,” says Khater. “Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates.”
Freddie Mac reported the following national averages with mortgage rates for the week ending Jan. 5:
30-year fixed-rate mortgages: averaged 6.48%, up from last week’s 6.42% average. A year ago, 30-year rates averaged 3.22%.
15-year fixed-rate mortgages: averaged 5.73%, also up from last week when they averaged 5.68%. A year ago at this time, 15-year rates averaged 2.43%.
Source: Realtor Magazine | January 5, 2023 publishing