Affordability improves, as do hopes for a good spring

Affordability has improved in the mortgage market since December, thanks to declines in mortgage rates and a slowdown in home price appreciation.

Here’s a spoiler: Industry insiders believe this trend will continue for months, signaling a good spring is ahead.

“It has been the rise in prices [and] interest rates that have limited affordability,” Doug Duncan, senior vice president and chief economist at Fannie Mae, he said in an interview.

However, if the US economy goes through a mild recession, as the economist expects, mortgage rates are likely to drop in tandem with job losses, keeping home price appreciation low. slow.

“Those things will improve affordability,” Duncan said.

Regarding mortgage rates, Freddie Mac’s The latest report showed Thursday morning that 30-year fixed mortgages fell to 6.13% as of January 26, down two basis points from the previous week. Rates were at 3.55% a year ago. A Daily Mortgage Newsthe rates were located at 6.18%, three basic points less than the previous day.

According to industry experts, rates will continue to decline, reaching the high 5 by the end of the year.

“Mortgage rates continue to decline, and as a result, home-buying demand is thawing from the months-long freeze that hit the housing market,” Sam Khater, chief economist at Freddie Mac, said in a statement. “Prospective homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, driven by first-time homebuyers.”

When it comes to home prices, Holden Lewis, a home and mortgage expert at NerdWalletsaid some homebuilders cut prices to stimulate Sales.

“In December, the typical new home costs almost $50,000 less than it did in October. The combination of lower fares and lower prices boosted sales in December and could be doing the same in January,” Lewis said in a statement.

A good spring ahead?

Affordability deteriorated in 2022. Overall, mortgage payments increased by about 40%, or $534, according to the MBA’s Purchase Request Payment Index (PAPI).

However, the national median payment requested by purchase applicants decreased to $1,920 in December, down from $1,977 in November and $2,012 in October, the data shows.

“There was a slight improvement in homebuyer affordability last month as mortgage rates fell 37 basis points from November,” said Edward Seiler, MBA associate vice president of home economics and executive director of the Research Institute for Housing Americahe said in a statement.

Added Seiler: “With inflation cooling slightly, MBA expects both mortgage rates and home price growth to decline, which, coupled with inflation cooling, should help bring more potential buyers to the market.” during the spring home buying season.

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