Currently, the 30-year fixed mortgage rate as at an astonishing 8%. This is the highest it has been since the 1980s when the rate was over 15%. In the past few years, it has been shifting between 4-6%. Why is the rate so high? There are a few different reasons for this. 1. The rise in inflation. 2. The uncertainty about what the Federal Reserve's next move will be. As a result, home buying demand has dropped significantly to low levels that have not been touched since the mid 1990s. According to MBA loan applications, mortgage applications have been at a record low based on the past 2 decades.
According to the NAR, the predicted average 2023 fixed rate will be 6.9% and in 2024 will shrink to 6.3%. Unemployment will rise in 2024 as there is potential for an economic recession. With a recession, comes a compression of the job market. There is a lot of uncertainty for those who want to buy homes as their purchasing power is much lower than it typically is. Only time will tell to see whether mortgage rates recover or not.
Yea that is the big question is when this all is going to start slowing down and interest rates come back down. I find it interesting that it seems like so much land in the past year or two is being developed for housing. With the current interest rate I wonder if these newly built homes will be vacant or how that will be affected.
ReplyDeleteBrady,
ReplyDeleteI was particularly interested in reading this blog post because throughout the semester we have identified Fixed Mortgage Rates to be a factor within business cycles and our economy and we have used it to forecast where our economy might be going. Particularly, for this past month, there continues to be an unresting upward trend in the rates from year to year. As Professor Skosples always reminds us in class, he waited for the mortgage rates to be around 2% (maybe a little higher) to purchase his home. As we continue to observe this upward trend, it makes me wonder whether by the time we are all looking to buy houses out of college, if our expected low mortgage rate will be higher than 2%. Without a sudden spike in housing demand, I don't see the rates dropping to those low levels it once was anytime soon.