Two weeks ago, mortgage rates had been on a steady decline inching closer to 5% at 6.09%. Since, rates have risen to 6.32% – the highest rate in five weeks. The average rate one year ago was 3.92%. Check out the Housing Market Tracker data from the second week of February.
Earlier this month, the Fed raised interest rates by another quarter-point and suspects there will be at least two more quarter-point increases this year.
As of Tuesday, February 21, the growing cost of housing was singled out as the main contributor to inflation in January 2023, according to the Bureau of Labor Statistics (BLS).
While inflation has been a key contributor to housing unaffordability, “as the Federal Reserve hikes interest rates in their effort to tamp down inflation, they are in part making housing more expensive for those already burned by inflation,” Dr. Lisa Sturtevant, chief economist at Bright MLS, said in a statement. New housing starts also dropped 4.5% in January. Read more here.
In January, Florida single-family sales fell 32.5% but for-sale inventory rose 134.2%, which is 2.8 months’ worth of supply. The decline in sales does not come as a surprise as interest rates are twice as high as they were this time last year; however, Florida Realtors® Chief Economist Dr. Brad O’Connor notes, “the January drop in sales is the smallest year-over-year decline we’ve had since last October.”
The latest Mortgage Bankers Association (MBA) survey showed that the mortgage loan application volume declined 7.7% for the week ending Feb. 10. Mortgage applications were down 57% this week last year, according to HousingWire.
“Mortgage rates increased across the board last week [second week of February], pushed higher by market expectations that inflation will persist, thus requiring the Federal Reserve to keep monetary policy restrictive for a longer time,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “Mortgage applications decreased for the second time in three weeks because of these higher rates.”
In January, consumer prices rose by 6.4%, the lowest yearly pace since October 2021, according to data by the BLS. In December, the index posted a yearly increase of 6.5%.
“While this is the smallest year-over-year price increase since October 2021, today’s report suggests that the downward trend in inflation may be bumpier than had hoped,” said Sturtevant. Read more here.
In other news, real estate investing is down 45.8% year-to-year (50.7% in Tampa), the second-biggest decline in investor purchases since 2008. “In dollar terms, investors bought $31 billion worth of homes in the fourth quarter, down 42.7% from $54.1 billion one year earlier and down 27.5% from $42.8 billion one quarter earlier,” reports Florida Realtors®.