Housing Market Demand Stirs as Mortgage Rates Falls
New York, NY, February 7, 2023-"Falling mortgage rates are beginning to stir demand in the housing market,” reports the Wall Street Journal.
“The average 30-year home loan rate has come down by just about a full percentage point from a 20-year high above 7% in November, largely in response to signs that the Federal Reserve is nearly finished lifting rates. That has brought some new buyers into the market.
“Mortgage applications are up by about a quarter since the end of last year. A measure of signed real-estate contracts rose in December after six months of declines. And the number of people contacting real-estate agents to start the buying process has rebounded from a November low, according to brokerage Redfin Corp.’s internal data.
“Rates are still well above the 3% range from a year ago, but ‘the fact that they are a percent lower-no one is complaining about that,’ said Michael Menatian, president of Sanborn Mortgage Corp. in West Hartford, Connecticut. ‘If anything, they are pleasantly happy.’
“The housing market is a barometer of how the economy is responding to a loosening of financial conditions in recent weeks. Stocks and bonds have both rebounded strongly to start the year on the premise that inflation is coming down without putting the U.S. into a deep recession.
“Yet the Fed has indicated that it is committed to keeping rates high until inflation is lower, and it is willing to risk a recession to do so. High rates alongside a recession could be a one-two punch for any rebound.
“No matter what happens, it is likely to be a slow year for the housing market. Housing activity remains down sharply from a year ago, when the Fed began to lift its benchmark rates to curb inflation. That pushed up mortgage rates at record speed, forcing buyers and sellers out of the market. Home sales fell for most of the past year, quickly snuffing out a boom from the height of the pandemic.
“The slowdown has pulled national prices down from their peaks last year, though the S&P CoreLogic Case-Shiller National Home Price Index is up 40% from three years ago. The decline, which stretched into its fifth month in November, is expected to continue, hitting once-hot markets such as Boise, Idaho, especially hard.”