San Francisco Chronicle - (Sunday)
Long-term mortgage rate falls to 7.03%, lowest since August
LOS ANGELES — Home loan financing costs eased again this week, as the average long-term U.S. mortgage rate slid to its lowest level in four months.
The average rate on a 30-year mortgage dropped to 7.03% from 7.22% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.33%.
The last time the average rate was lower was in early August, when it was at 6.96%.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loan, also declined this week, with the average rate falling to 6.29% from 6.56% last week. A year ago, it averaged 5.67%, Freddie Mac said.
This is the sixth straight weekly drop for rates, echoing a recent pullback in the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield, which in mid October surged to its highest level since 2007, has been falling on hopes that the Federal Reserve may finally be done raising interest rates in its bid to tame lower inflation.
“Although these lower rates remain a welcome relief, it is clear they will have to further drop to more consistently reinvigorate demand,” said Sam Khater, Freddie Mac’s chief economist.
The average rate on a 30-year home loan climbed above 6% in September 2022 and has remained above that threshold since. In late October, it reached 7.79%, the highest level on records going back to late 2000.
Real estate circles and media outlets have been abuzz lately with chatter about the recent decrease in interest rates (0.5% in the last three weeks), which has spurred a new wave of speculation about the 2024 market. Optimistic realtors and some buyers anticipate an uptick in sales activity at some point next year. But so much depends on willing sellers, who are also feeling stung by the relatively high rates.
For starters, many homeowners enjoy a sub-3% rate and have little incentive to buy a new home at a higher rate. Many are choosing not to move in response to the variables that compelled them to sell before the rate uptick, such as retirement, downsizing, and proximity to family. Critical life events are inducing some sales, but sellers are feeling the pinch of expensive repair and upgrade costs and a market peppered with price reductions.
And unless a property is brought to market in tip-top condition with virtually no location, layout, systems, or structural flaws, it is likely not to receive multiple offers at the high end of market value. To boot, high interest rates have spurred buyers’ critical savvy and a reticence to readily meet seller price expectations. And we’re here for the challenge, guiding our clients through the current conditions and staying prepared for the exciting market shift that is apparently likely to reveal itself in 2024.
The housing market is one of the sectors of the economy most directly affected by the Federal Reserve raising interest rates, and those increases are affecting people both trying to buy and sell homes.
The market is complex, with the process being driven by a wide variety of factors that are local, national and global. It is still not a bad time to sell a home, as the market is still slightly favoring sellers.
That being said, with raising rates, sellers need to recognize they can’t expect the offers from buyers to start flooding in the moment their home is listed, and may need to be patient for the right sale. This also means that it’s more important than ever to price a property appropriately.
While the rise in mortgage interest rates isn’t negligible, it is not so dramatic that it should dissuade sellers from pursuing their goals.
Working closely with a knowledgeable, local Realtor can provide valuable insight to guide sellers through the process — and with the right approach of pricing, marketing and timing, a successful and profitable sale can still be achieved.