Lower Rates Lead to Mortgage Applications Increasing 

This year has seen a surge in the housing market, which could be meaningless to those who are not looking to buy or are already in their dream homes. But for those who have seen recent headlines about the housing market--what do the fluctuating mortgage rates mean for you? At the beginning of 2022, the rate for a 30-year mortgage was 3.22%, and for a 15-year mortgage, 2.43%. Mortgage rates fluctuated throughout the year; however, in mid-November, mortgage rates for a 30-year mortgage had sunk from 6.61% to 7.08% in one week, according to Freddie Mac. Regardless of the fluctuations, this spells hope for potential homebuyers.

From the pandemic's beginning, an environment of inflation has been created that many experts state will lead to a recession. Whether this recession occurs or not, it could leave prospective homebuyers in a place of confusion.

Here we are in December 2022, about to close out the year and receive a final assessment. As of December 22nd, the 30-year fixed rate mortgage had averaged 6.27%, while a 15-year fixed rate mortgage was 5.69%. Regardless of how steeply the rates rose and fell throughout the year, potential homeowners jumped at the opportunity to buy a home before the low rates were gone. 5.95 million homes were sold in 2022, down from the 6.12 million sold in 2021. 

During 2022, of the 5.95 million homes sold, 12 in 1,000 of were Millennials age 29 purchasing their first home. Where will this increase in applications lead? Predictions estimate that the rate of homes sold in 2023 will rise to 6.07 million, if not more.

If the number increases to the point where there are more buyers vs. homes for sale, the housing market will cause a domino effect leading to inflation, which, in effect, causes the mortgage rates to skyrocket. The federal reserve remains determined to prevent a full-blown recession, and fortunately, the housing market has a way of stabilizing itself and the rest of the economy. This year, the federal reserve raised its federal fund's rate from zero to 4.75% to combat the potential inflation, which has already started seeping into the economy.

This cycle isn't something we haven't seen before; however, it is still to be determined what type of effect it will have in 2023. 

From the pandemic's beginning, an environment of inflation has been becoming steadily more of a possibility that many experts state will lead to a recession. Whether this recession occurs or not, it could leave prospective homebuyers in a place of confusion. The federal reserve remains determined to prevent a full-blown recession. Fortunately, the housing market has found ways to stabilize itself and the rest of the economy in the past.

How Can You Prepare?

To buy or not to buy? That is the question. One way to start preparing is knowing your options. Having a trusted resource that is leveraging technology to provide you a direct path to your options without going through the full process. Try LoanSMART powered by ReviewMyMortgage to get your options in minutes. Now, saving is and always should be the first step. Saving for a rainy day, the down payment on your future home, or the surprise expenses that can come up after buying a home. Still unsure? Budgeting and shopping for the lender who provides you with the best mortgage rate are where you should start. What this could look like is applying to one-three lenders but no more than five. Each lender will provide a pre-approval rate, with various stipulations based on the type of loan you apply for. 

This is where your knowledge becomes your power! Use the multiple rates as leverage to negotiate the best loan within your budget. Then there is the "What if?" Everything may seem significant on paper, but do your due diligence before signing any specific loan. A lender's reputation, customer service and person-ability will make the difference for you before buying your home and maintaining your mortgage in the future.

For example, in 2022, Fannie Mae provided $580 billion in liquidity, which enabled approximately 931,000 single-family home purchases, 826,000 single-family mortgage refinancing, and 435,000 units of multifamily rental housing. Additionally, Fannie Mae helped homeowners avoid foreclosure through 146,000 loan workout solutions. 

Foreclosure counseling and the quality a lender provides--are something to be considered in your decision to purchase a home.

Looking to the Future

As we enter 2023, there are predictions that the current mortgage rates may remain the same for a short period and steadily begin to increase. The overall consensus is subjective; some predict the rates will skyrocket in 2023, and others say it will take at least three years. What influences the stability or lack thereof of the housing market will be the level and direction of the bond market (such as 10-year Treasury yields), the number of consumers (home-buyers) and the unemployment rate. When the unemployment rate was published in November 2022, it was holding at 3.7%. If unemployment increases, this will stagger the number of homebuyers and homeowners trying to sell.

For a homeowner trying to sell or a potential homebuyer, now is the time to buy, sell and get your rate locked in because the current environment can change quickly. Even those simply looking to refinance should choose this time to find the best loan. The current 30-year mortgage refinance rates are 6.69%, and a 15-year is 6.16%.

However, all potential homeowners and sellers should remain vigilant about the market. You can do this by returning as much as possible to our site for updates and all educational information about home buying. 

Citations

Statista. (2022, June 27). U.S. existing home sales 2005-2023. https://www.statista.com/statistics/226144/us-existing-home-sales/

TRADING ECONOMICS. (n.d.). United States MBA 30-Yr Mortgage Rate - 2022 Data - 1990-2021 Historical. https://tradingeconomics.com/united-states/mortgage-rate

Schedule of Releases for the Consumer Price Index. (n.d.). https://www.bls.gov/schedule/news_release/cpi.htm

Refinance Application-Level Index | Fannie Mae. (n.d.). https://www.fanniemae.com/research-and-insights/surveys-indices/refinance-application-level-index?utm_campaign=esg-cp-invest-202207

NextAdvisor. (2022, December 15). ‘The Worst Is Over’ for Mortgage Rates Despite Another Fed Hike, Experts Say. NextAdvisor With TIME. https://time.com/nextadvisor/mortgages/mortgage-news/mortgage-rates-fed-meeting-december-15/