Mortgage rates dropped sharply last week following a series of economic reports that indicated inflation may finally be easing. The 30-year fixed-rate mortgage averaged 6.61% in the week ending November 18, down from 7.08% the week before, according to Freddie Mac, the largest weekly drop since 1981. A year ago, the 30-year fixed rate stood at 3.10%. Mortgage rates have risen throughout most of 2022, spurred by the Federal Reserve’s unprecedented campaign of hiking interest rates in order to tame soaring inflation.

 

In the last week, two key inflation reports – the Consumer Price Index and Producer Price Index – showed that prices rose at a slower pace than expected in October, suggesting inflation is inching in the right direction, and has perhaps even peaked.

 

Inflation appears to be easing: Investors saw last week’s lower-than-expected CPI data as an indication that the Federal Reserve may make smaller interest rate hikes in the months ahead, said George Ratiu, Realtor.com’s manager of economic research. 

 

“The 10-year Treasury dropped from 4.15% last Wednesday to 3.68%, as capital markets seemed to cheer the slowdown in inflation as a sign that the Federal Reserve’s monetary tightening is having its intended effect,” Ratiu said. Even though inflation data is moving in the right direction, the Fed has said it does not expect to back off of raising rates until inflation gets closer to the desired target of 2%. Still, the downshift in mortgage rates over the past week has brought a sliver of relief to buyers, said Ratiu. 

 

Mortgage applications increase: Mortgage applications increased for the first time in seven weeks, according to the Mortgage Bankers Association, with both purchase and refinance applications up. “Signs of slowing inflation pushed mortgage rates below 7% for the first time since mid-October, but with rates still relatively high and affordability correspondingly reduced, the average loan amount is now at its lowest level in nearly two years,” said Bob Broeksmit, president and CEO of the MBA.

 

More prospective buyers are actively searching for a home: According to the latest Housing Trends report by the National Association of Home Builders (NAHB), in Q322 59% of prospective buyers had moved beyond the planning phase and had become fully engaged in the buying process. This was up from 46% in Q122 and 49% in Q222. The share of prospective buyers actively searching for a home rose in every region between the second and third quarter of 2022, with the West having the largest share at 68%. Less competition and more inventory were the driving force for the share increase in the recent quarter.

 

With interest rates starting to ease we are seeing some new opportunities for buyers and sellers. Lenders are offering options for home buyers to buy down their interest rate and sellers in some cases are offering credits to help buyers obtain a more affordable rate. If you would like to discuss today's market and whether now is a good time for you to buy or sell, give me a call at (562) 900-9430.

 

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