In December 2022, Freddie Mac’s Chief Economist, Sam Khater, stated that the housing market would remain in turbulence with declining sales, inventory, and unpredictable prices despite heading toward a more moderate direction toward the end of last year.
Unlucky for us, we’re starting the year of 2023 with an increase in interest rates as the Fed announced another boost mid December, which most likely will lead us to a prolong weak market this winter.
Mortgage Facts from Freddie Mac
- 30-year fixed-rate mortgage averaged 6.48 percent as of January 5th, 2023, up from last week when it averaged 6.42 percent. A year ago at this time, the 30-year FRM averaged 3.11 percent.
- 15-year fixed-rate mortgage averaged 5.73 percent, down from last week when it averaged 5.68 percent. A year ago at this time, the 15-year FRM averaged 2.33 percent.
Weekyly Data From Freddie Mac
| Date | 30‑Yr FRM | Rate Change | 15‑Yr FRM | Rate Change |
|---|---|---|---|---|
| January 05, 2023 | 6.48% | +0.06% | 5.73% | +0.05% |
| December 29, 2022 | 6.42% | +0.15% | 5.68% | -0.01% |
| December 22, 2022 | 6.27% | -0.04% | 5.69% | +0.15% |
While we had a small relieve as interest dip for a short period of time during the holidays season, the most recent hike continue to put some more damage on the mortgage demand. Additionally, at the beginning of the week, rates started higher and continued to climb throughout the week after the news of Bank of Japan changing its monetary policy, causing a world wide shock. Rates are now close to 25 basis points higher than they were last week Thursday.
The average interest rate for 30-year fixed-rate mortgages of properties in escrow, with conforming balances ($647,200 or less) and a 20% down payment, increased to 6.58% from 6.34% comparing to 2 weeks ago. Taking the measure to another extreme, this number was 3.33% at the end of 2021. The rate hike also suppressed the refinancing demand by 16.3% from two weeks ago and by 87% comparing to December 2021. Purchase applications decreased to 12.2% from two weeks earlier and were down 42% year over year, which was the lowest level since 1996.
In Conclusion
We will be keeping our eyes on the trend during the next couple weeks as there will be key reports on economic and employment reports releasing very soon. Depending on how these reports are, rates will most likely be affected. However, until then, it’s unclear where the rate will move!
Like mentioning above, this winter will be very likely a slow season for the housing market as there are lots of uncertainty in the direction of interest rates, economy, and other macroeconomic components. Worse yet, we haven’t even at the bottom yet! However, just like any cycle, many economists are quite optimistic that everything will bounce back by the end of 2023 or beginning of 2024 latest.
If you are a first time home buyer, building a sizable down payment and reserved funds will only help you later in the future when the market returns to its equilibrium mark. To learn more about how to increase your saving rate, check here. If you are an investor, you can certainly find great buying opportunities specifically in this market. Needing help? Feel free to reach out to our team at info@chadvorealestate.com as we have teams specializing in both first-time buyers and investment services.
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