Are Lower Mortgage Rates Bringing Buyers Back to the Market?

Each week, we get a better understanding of the 2023 market. To understand what is normal and what isn't, it's helpful to keep an eye on different metrics. Now that we're one month into the new year, we're getting a better idea of what's going on with prices and active and pending listings.

The average rate on a 30-year fixed-rate mortgage fell to 6.09 percent this week, the lowest in five months. This results in a lower mortgage payment of about 10%. On a seasonally-adjusted basis, pending home sales increased by 3% in December from November, the first increase in 14 months.

As mortgage rates rose last year, activity in the housing market slowed down. And as a result, homes started seeing fewer offers and stayed on the market longer. That meant some homeowners decided to delay selling.

Now, however, rates are beginning to come down—and buyers are starting to reenter the market. In fact, the latest data from the Mortgage Bankers Association (MBA) shows mortgage applications increased last week by 7% compared to the week before.

We are beginning to see the typical signs of a spring season with pending sales, some multiple offers, and a slight increase in mortgage applications and new listings. We need more time for a complete picture, but here are just a few things we have seen in our local market:

  • It is heating up, but it is still early.
  • The right price sells.
  • Buyers have more power, but there is still competition.
  • Multiple offers are happening, but they are more of an outlier.
  • Affordability is still an issue for some buyers.
  • Inventory is moving up but still low.

So, if you’ve been planning to enter the market to buy or sell this shift could be your chance. Here’s what experts are saying about buyers returning to the market as we approach spring.

Mike Fratantoni, SVP and Chief Economist, MBA:

Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall. As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”

Lawrence Yun, Chief Economist, National Association of Realtors (NAR):

The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”

Thomas LaSalvia, Senior Economist, Moody’s Analytics:

“We expect the labor market to remain robust, wages to continue to rise—maybe not at the pace that they did during the pandemic, but that will open up some opportunity for folks to enter homeownership as interest rates stabilize a bit.”

Sam Khater, Chief Economist, Freddie Mac:

“Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market.”

Bottom Line

Considering a move? Now may be the right time. Contact us and let's talk about the market, the best time to list your home or strategies for buying your next home.

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