Mortgage rates have reached their lowest level since last spring, offering potential relief to homebuyers. According to Freddie Mac’s latest Primary Mortgage Market Survey, the average 30-year fixed-rate mortgage was 6.6% for the week ending January 18. This marks a slight decrease from the previous week’s average of 6.66%. Compared to a year ago, when rates averaged 6.15%, the current rates are significantly lower.
Freddie Mac Chief Economist Sam Khater sees this development as encouraging for the housing market, especially for first-time homebuyers who are sensitive to changes in affordability. However, as demand for homes continues to increase, the already limited inventory for sale will face additional pressure.
While falling rates may be good news for buyers, there is still uncertainty about whether they will remain stable as the economy recovers. This poses a challenge for buyers who need to accurately budget for their home purchase. Realtor.com Economist Jiayi Xu highlights the difficulties faced by first-time homebuyers, who often have lower down payments. Even a slight increase in mortgage rates could push them further away from realizing their dream of homeownership.
Despite these challenges, experts predict a positive outcome for the mortgage industry in 2024. Fannie Mae’s Economic & Housing Outlook forecasts that 30-year mortgage rates will drop below 6% by the end of the year. This is seen as a healthy drop, considering that rates were above 7% in 1971 and reached over 18% in the 1980s.
As rates decrease, housing affordability is also expected to improve. However, many households still struggle to afford homes due to insufficient incomes, rising homeowners insurance rates, and inflation-related costs. In December 2023, the average mortgage payment in the U.S. was $2,361, which is $327 less than the all-time high in October.
Throughout 2023, only 15.5% of the homes on the market were affordable for the average American household, a significant drop from the 20.7% of affordable homes in 2022. This highlights the ongoing challenge of housing affordability in the country.
While homes may not yet be affordable for most buyers, there is hope for a more affordable market in the future. Redfin predicts a 1% year-over-year decline in home prices during the second and third quarters of 2024. This would be the first price decline since 2012, following the Great Recession.
As prices drop, there is likely to be a slight increase in listings, providing some relief to buyers in the grid-locked market of 2023. Redfin agents report that areas like South Florida will see the highest number of listings as residents list their homes for sale and move to lower-cost areas.
Overall, the mortgage industry is experiencing a period of low rates, offering potential opportunities for homebuyers. While challenges remain, experts predict a positive outlook for 2024, with lower rates and a potential decline in home prices. If you’re considering buying a home this year, it’s worth exploring mortgage lenders and rates through platforms like Credible to find the best options for your needs.
