Mortgage Rates Continue to Decrease below 7% Threshold

by: Aimee Burnett-Hartwig

Mortgage Rates Slide Further Away From 7% Threshold. Aspiring home buyers saw signs of hope for greater affordability this week as the average 30-year mortgage rate dropped to 6.49%, Freddie Mac reports. Recent economic data suggests mortgage rates have peaked after surpassing 7% in the second week of November. More stable rates could bring some uneasy home buyers back to the market, which would spell relief after recent dips in home sales and contract signings. Moderating rates also reflect growing optimism “around the prospect that the Federal Reserve will slow its pace of rate hikes,” says Sam Khater, Freddie Mac’s chief economist. The Federal Housing Finance Administration released its new conforming loan limits for 2023, hiking them 12% from this year’s base amount – which reflects the rise in home prices in 2022. Mortgage giants Fannie Mae and Freddie Mac will back loans at the baseline amount of $726,200 in 2023 (up from $647,200 this year). In high-cost areas of the country, the new loan limit for 2023 will be $1,089,300. 

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Pending Home Sales Declined 4.6% in October. Pending home sales slid for the fifth consecutive month in October, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings, sank 4.6% to 77.1 in October. “October was a difficult month for home buyers as they faced 20-year-high mortgage rates,” said NAR Chief Economist Lawrence Yun. “The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”

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Payrolls and Wages Blow Past Expectations, Flying in the Face of Fed Rate Hikes. Job growth was much better than expected in November despite the Federal Reserve’s aggressive efforts to slow the labor market and tackle inflation. The numbers likely will do little to slow a Fed that has been raising interest rates steadily this year to bring down inflation still running near its highest level in more than 40 years. The Dow Jones Industrial Average fell as much as 350 points after the report on worries the hot jobs data could make the Fed even more aggressive. The numbers come as the Fed has raised rates half a dozen times this year, including four consecutive 0.75 percentage point increases. 

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