{"id":2815,"date":"2023-07-13T03:02:29","date_gmt":"2023-07-13T03:02:29","guid":{"rendered":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/07\/13\/mortgage-rates-are-about-7-are-they-coming-down-anytime-soon\/"},"modified":"2023-07-13T03:02:29","modified_gmt":"2023-07-13T03:02:29","slug":"mortgage-rates-are-about-7-are-they-coming-down-anytime-soon","status":"publish","type":"post","link":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/2023\/07\/13\/mortgage-rates-are-about-7-are-they-coming-down-anytime-soon\/","title":{"rendered":"Mortgage Rates Are About 7%. Are They Coming Down Anytime Soon?"},"content":{"rendered":"

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Photo illustration by Realtor.com; Source: Getty Images<\/p>\n

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Homebuyers watching mortgage rates should buckle up\u2014but they probably won\u2019t enjoy this ride.<\/p>\n

Mortgage interest rates were above 7% for the past two weeks\u2014much to the dismay of many cash-strapped buyers. They averaged 7.09% on Tuesday before falling to 6.96% on Wednesday for 30-year fixed-rate loans, according to Mortgage News Daily<\/a>.<\/p>\n

\u201cWithin the last 30 days, we\u2019ve seen everything from low 6% to low 7%,\u201d says Jason Lerner<\/strong>, producing area manager at George Mason Mortgage in Towson, MD. \u201cThat\u2019s exceptionally volatile.\u201d<\/p>\n

It has, in fact, been a wild ride. Mortgage interest rates have been up, down, and then up again as investors try to guess the Federal Reserve\u2019s next move. The Fed has been steadily hiking its own short-term rate to bring down inflation by cooling the economy.<\/p>\n

When the Fed raises its own rates, mortgage rates have often followed. And Fed officials have indicated another rate increase\u2014or two\u2014is likely this year.<\/p>\n

The results of the Fed\u2019s actions have been mixed. Inflation has tumbled down to 3% annually<\/a> in June. That bit of good news caused mortgage rates to fall below 7% on Wednesday. But while that\u2019s a big improvement from when inflation was running at 9.1% during the peak in June 2022, it\u2019s still higher than the Fed\u2019s 2% goal. Other data, such as recent employment reports<\/a>, shows the economy is still stronger than the Fed would prefer.<\/p>\n

When a report comes out that shows employers are still looking for workers, consumers are still spending, or inflation remains high, investors worry the Fed will raise rates.\u00a0So mortgage rates rise in anticipation of another Fed increase.<\/p>\n

\u201cWe should expect a lot of bumping around,\u201d says\u00a0David Stevens<\/strong>, CEO of Mountain Lake Consulting, which provides consulting services to the mortgage industry. He\u2019s also the former CEO of the Mortgage Bankers Association. \u201cWhatever the economic news is, we see rates swing.\u201d<\/p>\n

Higher rates have made it more challenging for buyers to afford homes and incentivized many would-be sellers to stay put instead, worsening the housing shortage.<\/p>\n

Even when mortgage rates do come down below 7%, buyers shouldn\u2019t expect they will fall down to the record lows experienced during the COVID-19 pandemic.<\/p>\n

\u201cOne can never truly predict the future, but I don\u2019t see mortgage rates returning back to the 3% range in the remainder of my lifetime,\u201d Lawrence Yun<\/strong>, chief economist of the National Association of Realtors\u00ae, told CNBC<\/a>.<\/p>\n

Where will mortgage rates go next?<\/h2>\n

Real estate experts don\u2019t expect mortgage rates to remain this high forever.<\/p>\n

By year\u2019s end, Realtor.com\u00ae expects rates to be around 6.1%<\/a>. Stevens believes rates will be back in the mid-5% to 6% range by the first few months of next year.<\/p>\n

Once the Fed wrangles inflation down to its target, it should stop raising rates. The Fed is walking a tightrope trying to cool the economy without causing additional bank failures or pushing the nation into a recession. If the economy slumps too much, the Fed will likely cut rates to stimulate it. That should bring mortgage rates down as well.<\/p>\n

\u201cRates will never go back to where they were to the peak of the COVID pandemic, which was in the 2% to 3% range,\u201d says Stevens. \u201cBut they will normalize.\u201d<\/p>\n

Lower mortgage rates could lead to more homes for sale<\/h2>\n

Lower mortgage rates could help ease the housing shortage<\/a>\u2014and high home prices.<\/p>\n

Right now, many homeowners are reluctant to sell. Most sellers are also buyers who don\u2019t want to give up their ultralow mortgage rates to take out another mortgage with a rate that\u2019s likely more than double what they have now. Many are waiting for rates to come down, at least to the 5% range, before listing their properties.<\/p>\n

\u201cExisting homeowners with a very low mortgage rate [have] very little incentive to decide to sell,\u201d says Danielle Hale<\/strong>, chief economist of Realtor.com. The result? \u201cThere\u2019s nothing to buy, it\u2019s expensive to buy what\u2019s available to buy.\u201d<\/p>\n

So when a move-in ready home in a desirable area is listed at a good price, it\u2019s a bit of a unicorn in today\u2019s market. Hordes of buyers typically descend, and that fierce competition bids up the price of the home<\/a>.<\/p>\n

\u201cWith an increase in mortgage rates, you\u2019d expect a drop in property values,\u201d says\u00a0Roland Weedon<\/strong>, CEO of Essex Mortgage. Essex does business in 40 states, working primarily with first-time buyers and renters. \u201cBut because there\u2019s such a shortage of inventory, that hasn\u2019t happened.\u201d<\/p>\n

Mortgage lender Lerner is seeing borrowers stretch their \u201ccomfort levels\u201d with higher mortgage payments to make homeownership work.<\/p>\n

He\u2019s also seeing buyers offer lower down payments. They\u2019re using the rest of the money that would have gone toward their home to pay down other debt, so they have more money available for monthly mortgage payments.<\/p>\n

\u201cThe fact that we\u2019re back at this point again could be a drag on the housing market in the months ahead,\u201d says Hale. \u201cWe do expect mortgage rates will eventually decline. It\u2019s going to take some more progress on inflation.\u201d<\/p>\n

What determines mortgage rates<\/h2>\n

While rates are influenced by the Fed\u2019s rates, and often move in the same direction, they\u2019re more tied to what\u2019s happening in the bond market.<\/p>\n

After a mortgage is made, lenders will typically bundle it up with other loans into a mortgage-backed security, aka mortgage bonds. Then those are sold to investors on what\u2019s called the secondary mortgage market. This gets the mortgage off of a lender\u2019s books, freeing up more money to make new loans.<\/p>\n

If investors believe the Fed is likely to keep hiking rates, they\u2019re often reluctant to purchase mortgage bonds. One reason is they assume that the borrowers of those mortgages are likely to refinance those loans once rates fall again. There are also more mortgage bonds on the market for investors to choose from as a result of the bank failures. The FDIC is selling the portfolios of Silicon Valley Bank and Signature Bank. This makes these bonds less valuable.<\/p>\n

As mortgage rates are the inverse of bond prices, when bond prices are down, mortgage rates go up.<\/p>\n

\u201cGoing forward, we can expect rates to continue paying a tremendous amount of attention to incoming economic data,\u201d says Matthew Graham<\/strong>, chief operating officer at Mortgage News Daily. \u201cTraders are on the edge of their seats, waiting for evidence that the economy and inflation are finally cooling off in a meaningful way. \u2026 When it happens, we should see a reasonably swift move back toward more livable rates.\u201d<\/p>\n

The post Mortgage Rates Are About 7%. Are They Coming Down Anytime Soon?<\/a> appeared first on Real Estate News & Insights | realtor.com\u00ae<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Photo illustration by Realtor.com; Source: Getty Images Homebuyers watching mortgage rates should buckle up\u2014but they probably won\u2019t enjoy this ride. Mortgage interest rates were above 7% for the past two weeks\u2014much to the dismay of many cash-strapped buyers. They averaged 7.09% on Tuesday before falling to 6.96% on Wednesday for 30-year fixed-rate loans, according to…Read More→<\/a><\/p>\n","protected":false},"author":0,"featured_media":2816,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2815","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/2815","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/comments?post=2815"}],"version-history":[{"count":0,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/posts\/2815\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media\/2816"}],"wp:attachment":[{"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/media?parent=2815"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/categories?post=2815"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/billingsrealtybrokers.paradiseinnovations.com\/index.php\/wp-json\/wp\/v2\/tags?post=2815"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}