Market Updates

There are countless articles on the positive effects on your well being if you stop watching the news. Lately it seems watching a Netflix documentary of a serial killer may be better for you than the reality gloom and doom of the morning news. Increasing wedges in political isolation, threats of global unrest, and inflation flood the senses while you’re just trying to get your morning coffee. Although the euphoria of 2.75 – 3.0 rates are a thing of the past, people still need to buy homes. Here’s what you need to know.

Mortgage rates this week dipped slightly below 7%, even after the Federal Reserve aggressively raised its benchmark interest rate again to tame inflation. The 30-year fixed-rate mortgage averaged 6.95% this week after hitting a 20-year high of 7.08% last week, Freddie Mac reports.

“Even with the Federal Reserve raising its short-term fed funds rate by another large amount, longer-term interest rates look to move only slightly,” says Lawrence Yun, chief economist for the National Association of REALTORS®.

The Fed approved its fourth consecutive rate hike of three-quarters of a percentage point to help bring down 40-year high inflation. The central bank’s lending rate now falls within the target range of 3.75% to 4%—its highest since January 2008. Mortgage rates will start to “drift lower” once inflation has been contained—but that could be another year or two, Yun notes.

Mortgage rates likely will be volatile in the coming weeks, adds Lisa Sturtevant, chief economist. “Home buyers expecting mortgage rates to fall significantly will be disappointed,” she says. “The question is: Will rates stabilize or will they push even higher?”

Sturtevant says that if inflation remains stubbornly high, the Federal Reserve could continue to aggressively raise rates. “Under this scenario of persistently higher inflation, mortgage rates could climb to 8% or beyond in late 2022 and into the first part of 2023,” she says.

But if October’s inflation data—which will be released next week—shows signs of easing and offers some indication that the Fed’s tactics are working, the Fed could pull back on its rate increases. That could mean mortgage rates would stabilize, “though probably still remaining around 7%, on average, through the first part of 2023,” she notes. Inventory is slowly getting better evening the supply/demand market. And with the increase in interest rates, the once hyper aggressive sellers’ market is stabilizing into a better balanced market.  People still need places to live. What you can afford a year ago is different than what you can afford today. Work with your local lender and REALTOR® to help you find the home that meets your needs and that you can comfortably afford.  If you are renting a home, you are already paying a mortgage. It’s just for someone else.  Another way to look at it is if you’re paying rent, you’re theoretically paying a rate of 100%. And you have nothing to show for it.

Until next week, love where you live. And if you don’t … contact your local REALTOR®.

Brian Haufe, 2022 MBOR President