Builders and real estate agents alike are celebrating signs of life in the U.S. housing market. That'll happen when a mild home price correction coupled with mortgage rates falling from 7.37% in early November to 5.99% in February improves affordability a bit just as the market enters its busy season.
On Friday, the average 30-year fixed mortgage rate swung back up to 6.8%. That 6.8% mortgage rate is the highest reading measured by Mortgage News Daily since early November. It also means that affordability is once again deteriorating.
A borrower who took on a $500,000 mortgage in early February 2023 at a 5.99% fixed rate would have gotten a monthly principal and interest payment of $2,995. At a 6.8% rate (i.e. the average rate on Friday), a borrower would get a $3,260 monthly payment on the same size loan.
Heading forward, economists say there are three levers that can improve housing affordability: rising incomes, falling home prices, and falling mortgage rates.
The Mortgage Bankers Association: The D.C.-based trade group projects that the 30-year fixed mortgage rate will average 5.2% in 2023. Beyond this year, the group expects mortgage rates to average 4.4% in both 2024 and 2025.
Freddie Mac: Economists at Freddie Mac, which like Fannie Mae was also chartered to provide affordable mortgage financing, forecast that the 30-year fixed mortgage rate will average 6.4% in 2023.
Realtor.com: Economists at the home listing site believe the 30-year fixed mortgage rate will average 7.4% in 2023.
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