Market Update, December 15, 2023

The average rate for a 30-year fixed mortgage today is 6.62%. The last time we saw rates this low was in May.

An increase in mortgage applications last week, when rates were higher than today, indicates these lower rates are beginning to bring buyers back into the market. According to the Mortgage Banker’s Association, applications were up 7.4 percent on a seasonally adjusted basis from one week earlier.

If rates continue to fall, we’ll see more activity in the market. There’s a lot of pent-up demand because anyone considering purchasing a home – first-time buyers and people with homes to sell – has been sitting on the sidelines, waiting for rates to go down.

Realtor.com predicts rates will hover around where they are and average 6.8% throughout 2024. If inflation continues to improve, Realtor.com predicts rates could fall to 6.5% by the end of next year. They also expect that prices will slightly decline next year.

During 2023, according to Realtor.com, mortgage payments increased nearly 20% compared to payments in 2022. Payments on new mortgages were almost double what they were in 2020.

In other words, affordability became a huge issue this year as the costs for a typical home rose to about 37% of typical income.

If rates come down and prices decrease, affordability issues will get better. If wages rise, that will help, too. It’s likely to take more than a year for homes to reach historic averages regarding affordability.