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Rates Are Down From Last Year’s Peak; Good News For Homeowners, Buyers, And Sellers
By Kevin Joyce, NMLS#304807
Last week’s 30-year fixed-rate average mortgage rate was about 6.54% according to Freddie Mac, a publicly traded, government-sponsored entity that creates and trades in residential mortgages. The average weekly mortgage rate for 15-year fixed rate mortgages was 5.71%.
Most experts agree that the pandemic-influenced rates of the past are just that – a thing of the past.
Most forecasts are calling for lower rates toward year-end 2024, down to 6.2% and the Mortgage Bankers Association expects rates for 30-year mortgages to fall to 6% in the first quarter of 2025.
All expectations are that the Federal Reserve will cut interest rates at its next meeting, contributing to lower rates in 2025. The Fed doesn’t set mortgage rates, but its actions influence the cost and availability of mortgages.
Rates are mainly set by the yield on 10-year Treasury bonds. The rate you might pay depends on your lender, your credit score, and the size, type and term of the loan you’re seeking.
The good news is that rates are down from their peak last October, when the 30-year fixed rate was 7.79%, and even thought they seem high, rates are still well below historical averages.
That’s good news for homeowners, and an opportunity for people who purchased their homes in the last few years when rates were higher to refinance their mortgages and take advantage of the lower rates.
Refinancing at a lower rate can potentially save hundreds of dollars a month.
Most experts agree that the pandemic-influenced rates of the past are just that – a thing of the past.
In 2019, 30-year fixed-rate mortgage rates fluctuated between 3.75% and 4.5%. At the height of the pandemic, they dropped to as low as 2.65%.
We’re forecasting the new normal between 5.8% and 6% for 2025, but rates fluctuate with the economic conditions, so a low of 5.5% is possible, but so is a jump to 7%.
While rates are set by a larger financial market, individual expectations of future rates, and expectations of home price appreciation are really the core drivers of behavior in the housing and mortgage markets.
In simpler terms, expectations about the future affect whether a homeowner puts his or her home on the market, whether a homeowner refinances, and whether and when buyers and sellers enter the market or decide instead to sit tight.
What Does It All Mean?
For homebuyers, fluctuating rates foster uncertainty: Should you wait for rates to fall, or start shopping now? Timing the market is impractical, perhaps impossible, and unnecessary.
If you buy a home and mortgage rates fall, buyers can refinance their mortgage and take advantage of the lower rate. If rates go up, you benefit from a secure, affordable mortgage.
But, if you delay a purchase and rates go up, it only becomes harder to afford a home.
The falling rates offer other benefits for homebuyers.
As rates fall, the inventory of available homes increases. Sellers who delayed moving for want of an affordable replacement home have started listing their homes for sale. And, “days on the market” have been increasing, suggesting less competition in the market.
But home prices remain high, and mortgage rates aren’t the only factor affecting availability.
The median home price in Rockland County is approaching $700,000, about a 50% increase from pre-pandemic days. Expectations are a continued increase in the median home price, but at a slower growth rate than we’ve seen in recent years.
Winter is a slower time for home sales, but it is also a good time to shop with fewer buyers looking. Traditionally, buying picks up in the spring and peaks in early summer. If you can find the right home, less competition can mean lower prices and more ability to negotiate during the winter.
Fannie Mae is predicting that home sales could be 10% higher next year, primarily because of increased availability and more affordable mortgages.
The drop in mortgage rates, and the increase in available homes, makes this a good time to shop for a new home. Added buyers make it a good time to list a property for sale. And for recent homeowners with higher mortgage rates, this may be a good time to consider refinancing.
