I think we all know that 30 year fixed mortgage rates are not going to go back down to 2%. Or even 3%.
Those days seem to have come and gone, thanks to the Fed’s inflation battle.
Ironically, the Fed was also the reason mortgage rate It went so low in the beginning.
Without his massive bond buying program known as quantitative easing (QE), mortgage rates would never have reached those levels.
But there is evidence that a mortgage rate in the 4-5% is enough to reinvigorate the flagging housing market.
Mortgage rates are just too high and affordable for most
A new survey of domestic equity investment company point Turns out that 22% of homeowners want to relocate by 2023, but most feel stuck.
As stuck as they feel, the mortgage rate lock-in effect is mostly to blame.
Simply put, many of today’s homeowners have very low, if not record low, mortgage rates. And they don’t want to lose them.
Worse, they don’t want to trade them in for a significantly higher rate on a more expensive asset.
At the same time, everyone has their price, and that’s true, even if it means bidding goodbye to ultra-low mortgage rates.
The question is, what is that price? What’s less to say goodbye to that sweet low interest rate?
Well, Point asked these same potential home buyers what would be holding them back from moving in by the end of 2023.
And it appears that mortgage rates are the sticking point for both those with an existing mortgage and those without one.
Point found that 29.7% said “the mortgage rate for a new home would be higher than my current mortgage rate.”
And another 12.7% said that despite not having a mortgage, “higher mortgage rates would prevent me from buying a new home.”
Overall, this is 42.4% of the respondents who want to buy a home in the next year. So it is clear that mortgage rates are very high.
The next logical question is what rate is acceptable to buy a home in today’s market?
A mortgage rate between 4-5% will be sufficient for most home buyers.
Point also asked what rates would be needed for these home buyers to consider a purchase over the next 6-12 months.
While 10.2% will go ahead with rates between 6-7%, and 22.8% will be fine with rates between 5-6%, the sweet spot seems to be a range of 4-5%.
Some 28.7% of respondents chose that mortgage rate range, which is higher than any of the other options listed.
Taken together, about 62% of these potential buyers would be cool with mortgage rates between 4% and 5%.
This is good news for the housing market, especially since a 30-year fixed rate of between 4-5% looks like a real possibility in 2023.
thanks for a couple cpi report There has been a downward trend in interest rates, indicating a reduction in inflation.
At last glance, the 30-year is now pricing in the high 5s or low 6s, meaning it won’t take long to get to that sweet spot.
This is especially true if inflation continues to decline in 2023 and the Fed wraps up its interest rate hikes.
His stand has already softened and he will only present his side fed funds rate .50% today and even less in 2023.
It would hypothetically possibly lower mortgage rates even further in 2023 sub-5% mortgage ratesSolving that stubborn issue.
There’s just one more thing – high house prices.
House prices also need to come down by 5%
Yes, mortgage rates are currently very high and have reduced affordability. But the same is true of home prices.
This one-two punch has stopped the housing market in its tracks. If home prices were more affordable, high mortgage rates would not be as much of a problem.
And this is evidenced in Point’s survey, which found that 31% of respondents would not be able to buy a home in the desired time frame due to home prices being “too high”.
That 31% share was the highest of all potential handicaps, although there were two questions related to interest rates that collectively held a 42.4% share.
Still, it shows that there are many issues in the housing market, and there isn’t one easy fix to get things back on track.
However, a combination of lower mortgage rates and slightly lower asking prices could revive the housing (and mortgage) market in 2023.
Interestingly, 71.9% of respondents believe mortgage rates will be “a lot or somewhat higher” 12 months from now. that remains to be seen.
(Photo: carolina georgetou,