Freddie Mac reported that the 30-year fixed-rate mortgage (FRM) declined for the sixth consecutive week after news of the Federal Open Market Committee’s (FOMC’s) seventh rate hike in 2022, the seventh action in 2022 alone. For the week ending December 22, 2022, the 30-year FRM averaged 6.27%, a decrease from 6.31% last week. More than half of this total was achieved by the 30-year FRM a year ago when it averaged 3.05%.
According to Freddie Mac’s Chief Economist Sam Khater, new data indicates that homeowners are cautious about listing their homes despite rates falling significantly for six straight weeks. The majority of homeowners have fixed mortgage rates below 4% and are carefully weighing their options.
Rates have continued to drop, causing a small increase in mortgage application volume, as the Mortgage Bankers Association (MBA) reported a 6% increase in refinance applications over the past week.
As mortgage interest rates move downward, prospective buyers may return to the market in 2023, according to MBA President and CEO Robert D. Broeksmit, CMB.
As a result of the high process, tightening economic conditions, and rates still above 6%, many first-time buyers are concerned about affordability. The latest Fannie Mae Home Purchase Sentiment Index (HPSI) indicates more optimism about home purchases than nine months ago, but buyer sentiment remains somewhat bleak. As of November, the sentiment was just above an all-time low, set on last month’s HPSI, and much lower than at the same time last year. In comparison to last year, the full HPSI fell 17.4 points.
Ratiu observes that many families are searching for affordability in lower-priced metros, where a house can fit into their budgets. The median prices in some areas, such as Connecticut, Columbus, Fort Wayne, Hartford, Manchester, Pennsylvania, New Hampshire, Ohio, Lancaster, Indiana, or Topeka, Kansas, remain below $300,000. Buyers from more expensive locations are drawn to these areas because the local economies are strong, and the lower median prices.