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Falling Mortgage Rates Bring Some Home Buyers Back to Market

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Early in the pandemic, when many urbanites left New York to work remotely in far-flung locations, Molly Parker-Wade instead moved from the West Coast to Brooklyn to be closer to family.

Wade, 35, an Amazon public relations executive, was ready to buy after a year of renting just as the cost of a mortgage began to skyrocket. Late last year, mortgage rates hit her highest level in 20 years, sending a chill to the housing market and her buying plans.

“I learned about mortgages in 2022,” she said.

Despite high interest rates, Wade signed a contract for a $975,000 one-bedroom apartment in Crown Heights in December. “It felt like the right thing to do at the right time,” she said.

Homebuyers, who were left behind by soaring borrowing costs and soaring house prices last year, are slowly making their way back into the market. Mortgage rates have fallen, but the average interest rate on the most common home loan fell to a five-month low this week, making it relatively affordable. Real estate experts say the state of the economy is now more important to buyers and sellers. , which is particularly difficult to measure.

“It’s work, work, work,” said Sam Cater, chief economist at mortgage lender Freddie Mac. The economy is strong, but “if all these recession predictions come true, that’s going to be a big deal,” he added.

of US economy The government last week reported that it grew at an annualized rate of 2.9% in the fourth quarter of last year. This is because Americans continued to spend despite stubbornly high inflation.of International Monetary Fund Earlier this week, it predicted that the U.S. economy would slow this year and unemployment would rise, but “it is possible that the U.S. economy can avoid a recession altogether, or that if it does, it will be relatively shallow.” there is,” said the organization’s chief economist.

As part of an effort to contain rising consumer prices, policymakers at the Federal Reserve have raised interest rates again On Wednesday, it rose to the 4.5% to 4.75% range for the eighth time in 11 months. The Federal Reserve is trying to slow the economy enough to bring inflation back under control without causing a deep recession.

U.S. Federal Reserve (Fed) Chairman Jerome H. Powell said after the central bank’s announcement that “housing sector activity continues to weaken, largely reflecting higher mortgage rates.” .

Federal Reserve action helped cool the once overheated housing market, but mortgage rates have recently begun to fall again. This is partly due to investors’ expectations that the central bank’s rate hike campaign is coming to an end. More activity in the housing market is likely. new construction saleThe Census Bureau, which is particularly sensitive to changes in mortgage rates, last week reported a 2.3% rise in December from the previous month.

Home buyers and sellers face a delicate balance between confidence in the economy and its impact on borrowing costs as economic growth strengthens and the Fed may raise interest rates and hold them there for longer. doing.They, like the Federal Reserve, are the so-called soft landingthe economy will cool in such a way that inflation will be moderated, but not so much that big purchases like a home will become more difficult than it used to be.

The average interest rate for 30-year fixed-rate mortgages fell to 6.09% this week. Freddie Mac reported On Thursday, it fell from the previous week’s 6.13%. Interest rates rose to 7.08% in Octoberthe highest level since 2002.

Nicole Bashaw, senior economist at Zillow, a home-price estimating site, said lower mortgage costs “will generally drive a little bit more demand as more people will be able to afford it.” Stated. But she warned that home prices are still high, even though they are falling month by month, as owners who fixed their homes at low interest rates a few years ago now have little incentive to sell.

“Prices will fall in the coming months, but they will be minimal,” she said, predicting a national price drop of 1% to 2% next year.

Bachaud said more homes are selling below list price, but many sellers are unfazed. new list It has slowed down slightly and homes are staying in the market longer. Second-hand home sales It fell 1.5% in December, the 11th straight month of decline, according to the National Association of Realtors.

Industry watchers say a further 0.5% drop in average mortgage interest rates to 5.5% would make reluctant owners more likely to put their homes on the market.

“Five and a half years is where people get really comfortable,” said Nicole Rouse, senior vice president of Denver-based lender OneTrust Home Loans. Until then, the owner will be motivated to sell by personal circumstances, she added.

For Jessica Grupp, the home purchase coincided with the end of active duty in the Navy. Since she was renting in San Diego, she knew she wanted to stay after she finished her service. “I’ve been wanting to shop here for a while,” she said.

When the market cooled and conditions picked up again, Grupp, 33, found a two-bedroom apartment in the city’s University Heights neighborhood. Her offer of $640,000 ($10,000 less than the asking price) was accepted, and she moved in with her dog, Kanna, in October.

Now a PwC consultant, Grupp is happy to bid on his time. “For me, it was about finding a place that fits my lifestyle and budget,” she said.

With more stories like hers, the real estate industry will welcome last year’s slowdown in the market.Some Online Brokerages — Including compass, redfin and Jiro — Fired the worker. Redfin and Zillow are house flipping businessRupert Murdoch news corp It is reportedly in talks with commercial real estate data provider CoStar to sell Move, a digital real estate business that includes Realtor.com and related sites.

“Home sales will probably bottom out now or in the first quarter of this year,” said Lawrence Yun, chief economist at the National Association of Realtors. resilient economy, solid job market Low mortgage defaults are one reason the housing market remains stable, he said, and he expects mortgage rates to fall to 5.5% by late spring or early summer.

“Stability is good, especially given the big changes that have happened in the last three years,” he said.

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