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Mortgage rates rise after six weeks of declines

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Mortgage rates rose this week, breaking their six-week streak just before the new year.

The average rate on the 30-year fixed mortgage rose to 6.42% from 6.27% the week before, according to Freddie Mac. That marked the first increase since mid-November, when rates began to ease after the Federal Reserve signaled it would slow its rate hikes amid cooling inflation.

Overall, mortgage rates have doubled this year, and that — combined with soaring house prices and rising inflation — has stifled home-buying activity. As fears of a recession grow, few economists expect housing conditions to improve significantly in the short term.

“The real estate market remains bearish, with sales, inventories and prices declining,” Sam Khater, chief economist at Freddie Mac, said in a statement. “The decline in sales and the slowdown in home prices started quickly in early 2022, but has moderated more recently. While the intensity of the weakness is easing, the market continues to decline and leading indicators suggest that housing will remain weak through the Winter.”

Demand remains stagnant on holidays

Demand for purchase mortgages remained muted in the week leading up to the Christmas holidays, the latest survey of apps by the Mortgage Bankers Association showed. Buying activity was down 3% from the previous week and 36% down from the same week a year ago.

“This is a particularly slow time of year for homebuying, so it’s not surprising that purchase orders haven’t changed much in response to lower mortgage rates,” said Mike Fratantoni, senior vice president and economist- head of the MBA, in a statement. adding that buyers could return to the market in late 2023 if rates fall further and economic conditions improve.

But now, accessibility concerns remain.

For example, the buyer of a typical home priced at $416,000 is facing a monthly mortgage payment of approximately $2,100 – without taxes or insurance – a 61% increase from last year, according to George Ratiu, economist senior and economic research manager at Realtor. with.

“For many buyers, there is a real financial ceiling that they have hit that they simply cannot stretch,” said Ratiu. “In time, things will adjust. Yields will rise and rates may decline, home prices will continue to fall from their peak. But in the short term, it’s obvious that many, many buyers are basically left out.”

Pedestrians walk past Brown Harris Stevens real estate in Brooklyn Heights, New York.  (Credit: Robert Nickelsberg/Getty Images)

Pedestrians walk past Brown Harris Stevens real estate in Brooklyn Heights, New York. (Credit: Robert Nickelsberg/Getty Images)

Seller confidence continues to plummet

As the year draws to a close, few home sellers have a positive outlook for the 2023 housing market, according to the latest Fannie Mae Home Trust Survey.

The most recent data reinforce pessimism.

Pending home sales fell 4% in November and were down 37.8% year-over-year, according to the National Association of Realtors, with double-digit declines nationwide. At the same time, pre-owned home sales fell for the 10th consecutive month in November and were down 35.4% year-on-year.

“We had a sticker shock phenomenon this year, which led to potential sales cancellations and caused more buyers to give up applying for a loan,” said Fratantoni.

A home for sale in December in Scituate, Massachusetts.  (Credit: Matt Stone/MediaNews Group/Boston Herald)

A home for sale in December in Scituate, Massachusetts. (Credit: Matt Stone/MediaNews Group/Boston Herald)

Meanwhile, those who are not lowering their prices are taking their properties off the market. New listings fell 28.4% year-on-year in November, Redfin data showed, the biggest drop on record since April 2020.

The housing downturn is likely to continue into 2023, Fratantoni said, as higher mortgage rates and still-high prices remain a major concern. For buyers still in the market, this could be a silver lining.

“It is difficult to anticipate the trajectory of rates… but we expect them to have a downward trend next year,” said Fratantoni. “We also expect homes to stay on the market a little longer in 2023. There will be fewer bidding wars and therefore the whole buying process will be less frenetic for buyers than it was in 2020 and 2021.”

Gabriella is a personal finance reporter for Yahoo Money. Follow her on Twitter @__gabriellacruz.

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