Mortgage rates biggest weekly drop in nearly 40 YEARS as inflation eases

Homebuyers are saving themselves $100 a month after mortgage rates hit their biggest weekly drop since 1981.

The 30-year fixed rate fell to 6.6 percent in the wake of declining inflation. A week ago the rate was over seven percent, while 12 months ago the rate for a 30-year fixed interest rate was 3.1 percent.

According to Redfin, the drop is helping new homebuyers save themselves $100 a week. The real estate company said the average mortgage payment in the US fell from $2,542 to $2,430.

The Fed is trying to contain the highest inflation in decades by making borrowing more difficult and limiting spending.

Several major inflation measures have shown that prices are falling somewhat, but other economic indicators show that consumers remain resilient, as does the job market.

The 30-year fixed rate fell to 6.6 percent in the wake of declining inflation, saving the average family $100 a month

Experts have warned that house prices will remain volatile for the next 12 months

Experts have warned that house prices will remain volatile for the next 12 months

The company’s deputy chief economist, Taylor Marr, said in a press release: “Serious buyers who need to buy a home ASAP can feel good about jumping on a home this week, knowing it will save them more than $100 per month.” month than the same house would have cost had they signed the deal a week earlier.”

He continued: “More casual buyers may want to wait a few more months, as there is reason to be cautiously optimistic that the worst of inflation and high rates are behind us and that monthly payments could fall further.”

That sentiment was echoed by George Ratiu, economic research manager at Realtor.com, who told Money Wise, “Some buyers may want to wait and see if rates fall even lower.”

He continued, “But with inflation still above 7 percent and the Fed committed to continuing to raise fund rates in the coming months, the mortgage market is not out of the woods. We may see interest rates rise above 7 percent before the end of the year.’

The 15-year fixed rate also fell from 6.3 percent to 5.9 percent. Last year around this time it was 2.3 percent.

Despite these declines, National Association of Realtors senior economist Nadia Evangelou told Money Wise, “At 7 percent, 1 in 8 renters can afford to buy the median-priced home. In contrast, nearly 1 in 3 renters could afford to buy the median-priced home a year earlier, when rates were nearly 3 percent.’

“For example, about 7.9 million renters can no longer afford to buy the typical house, while at the same time the share of first-time buyers in the housing market reached a new record low,” said Evangelou.

Multiple reports have suggested that mortgage prices will remain unpredictable through the end of 2022, while house prices across the country are still high.

Existing home sales (above) fell 5.9 percent last month from September to a seasonally adjusted annual rate of 4.43 million, the National Association of Realtors said Friday

Existing home sales (above) fell 5.9 percent last month from September to a seasonally adjusted annual rate of 4.43 million, the National Association of Realtors said Friday

Despite the sharp slowdown in transactions, the national median home price rose 6.6 percent in October from a year earlier, to $379,100.  Prices increased in all four regions

Despite the sharp slowdown in transactions, the national median home price rose 6.6 percent in October from a year earlier, to $379,100. Prices increased in all four regions

The central bank’s strategy threatens to push the economy into recession if it applies the brakes too hard.

According to data released Thursday, the number of homes started has fallen by more than four percent to 1.4 million units.

A day earlier, data from the National Association of Home Builders showed that confidence in the single-family home market is at a 12-month low. It marks 11 months of consistently declining confidence, the group said.

In a statement on their website, NAHB Chairman Jerry Konter said, “Higher interest rates have significantly weakened demand for new homes as buyer traffic becomes increasingly sparse.”

Konter also said, “With the housing sector in recession, the Biden administration and incoming Congress must turn their attention to policies that reduce construction costs and allow the nation’s homebuilders to expand housing production.”

According to Wells Fargo, about 37 percent of homebuilders have lowered prices, while 59 percent of homebuilders are using other methods to encourage new homebuyers.

Coinciding with the new rate cut, mortgage applications were 2.7 percent higher than last week, on top of a four percent increase in applications for home purchases.

Palm Beach-based realtor Kevin Kent further explained the impact of the drop in mortgage rates.

He told WPBF, “It can make a big difference. A 1% adjustment generally affects about $100,000 of what people can afford to buy and stay at the same budget and payment level. It can make a big difference, you know. I’ll tell you, they’re perspectives.’

He continued, “When I got into real estate, the interest rate was 14 percent… 17 percent. And people were still buying and selling houses. It is currently a different way of approaching the market. So a dip like that will help a lot of frustrated buyers.”

To look at it another way, a homebuyer with a monthly budget of $2,500 can afford a $380,750 home at current rates of 6.6%, giving him $12,000 more purchasing power than a week ago.

That same buyer could have bought a $368,750 home with last week’s rates of 7 percent.

Last month, home seekers had fewer homes to choose from as the supply of homes on the market declined for the third month in a row.

At the end of October, there were about 1.22 million homes on the market, representing 3.3 months of inventory at the current monthly sales rate, according to NAR.

“Inventory levels are still tight, which is why some homes for sale are still getting multiple offers,” Yun noted.

‘In October, 24 percent of homes were sold above the asking price. Conversely, houses that had been on the market for more than 120 days saw prices fall by an average of 15.8 percent, the economist said.

Sixty-four percent of homes sold in October 2022 had been on the market for less than a month.

New buyers accounted for 28 percent of purchases, up from 29 percent in September and a year ago. Cash sales made up 26 percent of transactions, up from 24 percent a year ago.

The report followed news on Thursday that single-family home construction and permits for future construction fell to their lowest levels since May 2020.

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