Mortgage rates have dropped under 7% for the first time in four months, offering a sliver of hope for the beleaguered housing market.
On a downward trend for seven consecutive weeks, rates have fallen from a high of 7.79% in October, with the average for a 30-year fixed-rate loan falling to 6.95% from 7.03% last week, according to a report by Freddie Mac.
The "sharp and surprising decline in mortgage rates could help lift [the housing market] out of its multifaceted chill or deep freeze, given the low level of home sales," said Mark Hamrick, senior economic analyst at Bankrate. The lower rates "could compel some owners to put their properties on the market, helping to bolster painfully low inventories," he added.
"Given inflation continues to decelerate and the Federal Reserve Board's current expectations that they will lower the federal funds target rate next year, we likely will see a gradual thawing of the housing market in the new year," stated Sam Khater, Freddie Mac's chief economist.
The Federal Reserve on Wednesday kept its benchmark rate unchanged and forecasted a series of cuts in 2023, resulting in a decline in 10-year Treasury yields. This development has also accelerated the drop in mortgage rates, surpassing earlier expectations, as highlighted by Thomas Ryan, a property economist at Capital Economics.
The National Association of Realtors predicts that a combination of lower mortgage rates and increasing income will drive a recovery in housing demand in the coming year. They anticipate a 13.5% rise in existing home sales in 2024. The NAR also projects that median home prices across the country will remain stable next year, resulting in "modestly improved affordability due to rising income."
