The 30-year fixed-rate mortgage rate continued to decline after peaking near 8%, reaching a four-month low as of Dec. 14. According to the Freddie Mac Primary Mortgage Market Survey, the 30-year FRM averaged 6.95%, down from 7.03% last week.
“Potential home buyers received welcome news this week as mortgage rates dropped below 7% for the first time since August,” Sam Khater, Freddie Mac’s chief economist said. “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 will likely see a gradual thawing of the housing market in the new year.”
As mortgage rates have declined, mortgage applications have increased. According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Dec. 8, mortgage applications increased 7.4% from the previous week.
The Refinance Index in the Weekly Mortgage Applications Survey increased 19% from the previous week and was 27% higher than the same week a year ago. The seasonally adjusted Purchase Index increased 4% from one week earlier.
“Borrowers who had seen rates near 8% earlier this fall are now seeing some lenders quote rates below 7%,” says Mike Fratantoni, MBA’s senior vice president and chief economist. “Refinance volume picked up in response to this drop in rates, with a particularly notable increase for FHA and VA refinance applications. Purchase volume was running about 18% below last year’s pace, as prospective home buyers are still challenged by a lack of inventory, even as rates have decreased.”
According to the MBA, the FHA share of total applications increased to 16.1% from 15% a year ago. The adjustable-rate mortgage share of activity decreased to 6.3% of total applications.
Mortgage rates trending lower have “breathed life” into the housing market, according to a new report from Redfin. New listings rose 1.3% month over month in November to the highest level since October 2022. Listings also inched up 0.1% on a year-over-year basis, the first YOY increase in a year and a half. Active listings—the total supply of homes for sale—grew 3.9% month over month, the largest increase since July 2022. The drop in mortgage rates has contributed to a roughly $200 decrease in the average monthly payment.
According to Redfin, pending home sales rose 2% month over month in November to the highest level in a year on a seasonally adjusted basis. Additionally, the median U.S. home sales price increased 3.7% year over year to $408,732.
