Mortgage rates trending up or down?
The first thing that everyone wants to know seems to always be: will mortgage rates come down? Unfortunately, this is always the hardest trendline to predict.
However, here’s a piece of advice if you want to know what’s going on with mortgage rates—keep an eye on inflation.
As the Federal Reserve has increased its federal funds rate over the last year in order to bring inflation back down to its 2% goal, mortgage rates have gone higher and higher. But with news coming out In July that Inflation reached 3%, down from a high above 9% in July of 2022, it gave hope that the Fed may slow their rate hikes as they get closer to their goal.
But during their July meeting, the Fed hiked interest rates by another .25% to a level between 5.25% and 5.5%. This is the highest that it’s been in 22 years. They also hinted that they may raise rates at their next meeting. If the Fed were to pause rate hikes at their next meeting in September, we may see mortgage rates come down.
How high are home prices?
Home prices have been rising through the summer, with the national median existing-home price coming in above $400,000 for just the fourth time ever in July. Historically, when mortgage rates have gone up, home prices have gone down. But there is such a lack of homes for sale right now, that prices have stayed high even in the face of higher rates.
However, national home prices were down year-over-year in May, dropping 1.0% from the high in 2022. This could mean that home prices, which shot up so quickly during the pandemic, may be starting to cool off. It’d be good for homes to keep adding value, but not so quickly that a large portion of potential homebuyers can’t afford to keep up.
Higher home prices are good news for homeowners, generally, but bad news for buyers. But most people who are interested in selling their home also have to buy their next home, so it’s not as great a benefit for them as it appears at first.
As we enter fall and temperatures start to drop, the question becomes will home prices start to drop as well. There’s good news for homebuyers, as home prices tend to follow the same seasonal pattern—prices start to go up in the spring before peaking in the summer, then fall back down through the fall and winter. Just look at the 12 months between June 2022, when national median prices reached their all-time high, and June 2023.
With September approaching quickly, we’re entering the final quarter of 2023. This has been a fascinating, and some may say, frustrating year in the housing market, as high rates and low inventory have prevented the market from gaining any traction. At least so far.
Over the last few years, since the beginning of the pandemic in March 2020, there’s been a lingering question of when things will return to “normal.”
At first, it was when would buyers be able to attend open houses after COVID restrictions were lifted.
Then it was a question of when mortgage rates would start to come back up from their record lows driven by economic policy designed to help offset the effects of lockdown.
And now the question centers on the prices and availability of homes for sale—when will home prices come down, and when will we have enough available inventory?
And as we get ready for fall, here’s another question: has the housing market returned to its normal seasonal patterns?
In most years, the housing market cools along with the weather, with fall home sales traditionally coming in slower than activity in the spring and summer. But with home sales sluggish over the last six months, the market may be ready to pick up this fall. As we head into the fall, let’s take a look at what factors will shape the housing market this season.
Mortgage rates trending up or down?
The first thing that everyone wants to know seems to always be: will mortgage rates come down? Unfortunately, this is always the hardest trendline to predict.
However, here’s a piece of advice if you want to know what’s going on with mortgage rates—keep an eye on inflation.
As the Federal Reserve has increased its federal funds rate over the last year in order to bring inflation back down to its 2% goal, mortgage rates have gone higher and higher. But with news coming out in July that inflation reached 3%, down from a high above 9% in July of 2022, it gave hope that the Fed may slow their rate hikes as they get closer to their goal.
But during their July meeting, the Fed hiked interest rates by another .25% to a level between 5.25% and 5.5%. This is the highest that it’s been in 22 years. They also hinted that they may raise rates at their next meeting.
If the Fed were to pause rate hikes at their next meeting in September, we may see mortgage rates come down. In the meantime, it’s important to work with an expert lender who will monitor all the major and minor factors that affect mortgage rates. He or she will be able to tell you when you should lock a rate and when you should wait.
How high are home prices?
Home prices have been rising through the summer, with the national median existing-home price coming in above $400,000 for just the fourth time ever in July. Historically, when mortgage rates have gone up, home prices have gone down. But there is such a lack of homes for sale right now, that prices have stayed high even in the face of higher rates.
However, national home prices were down year-over-year in May, dropping 1.0% from the high in 2022. This could mean that home prices, which shot up so quickly during the pandemic, may be starting to cool off. It’d be good for homes to keep adding value, but not so quickly that a large portion of potential homebuyers can’t afford to keep up.
Higher home prices are good news for homeowners, generally, but bad news for buyers. But most people who are interested in selling their home also have to buy their next home, so it’s not as great a benefit for them as it appears at first.
As we enter fall and temperatures start to drop, the question becomes will home prices start to drop as well. There’s good news for homebuyers, as home prices tend to follow the same seasonal pattern—prices start to go up in the spring before peaking in the summer, then fall back down through the fall and winter. Just look at the 12 months between June 2022, when national median prices reached their all-time high, and June 2023.
Just as home prices followed the established pattern of declining last fall, there’s no reason to believe that they won’t again this fall. So while the fall isn’t often considered a great time to buy a home, it may be perfect for homebuyers who are looking for a deal. Especially if mortgage rates come down.