One month ago, demand was weakening as mortgage rates surged higher than 7% but just last week, we started to see those numbers dip – at the fastest rate in 40 years – down to 6.58%, the second week in a row with notable rate drops.
“In recent weeks, rates have hit above 7% only to drop by almost half a percentage point,” said Sam Khater, Freddie Mac’s chief economist. “This volatility is making it difficult for potential homebuyers to know when to get into the market, and that is reflected in the latest data which shows existing home sales are slowing across all price points.”
Since January of this year, mortgage rates have more than doubled, echoing the sharp increase on the 10-year Treasury note. This increase is influenced by many factors including demand for the U.S. Treasurys and investors’ inflation expectations that can heighten the prospect of rising interest rates overall.
The most recent consumer price index (CPI) suggests inflation may have already peaked, reporting, “year-over-year CPI inflation peaked at 9.1% in June, and since then the monthly readings have steadily declined.”
This peak raises hope that the Fed will start easing up on its rate increases but, “recent comments by Fed officials have dimmed such optimism. Last week, James Bullard, who leads the Federal Reserve Bank of St. Louis, said that the Fed may have to raise its benchmark interest rate much higher than it has previously projected to get inflation under control,” reports Florida Realtors®.
This means mortgage rates may rise again and that risk increases if December’s inflation reading comes in on the higher side. Check out the CME FedWatch Tool, which monitors the likelihood of the Fed changing the target rate at the upcoming FOMC meetings.
Meanwhile, the National Home Builders Association/Wells Fargo Housing Market Index reported builder confidence fell for the 11th consecutive month. The index dropped to 33 in November, five points down from 38 in October, the lowest level since June 2012.
The good news is that NARs chief economist predicts there will be a ‘strong rebound’ in 2024 but home sales will only get worse before that happens.
In other news, rent prices continue to rise in Florida and Tampa falls second on the list. Rent increased nearly 3% in Tampa, while Orlando was 2.2% and Jacksonville was 1.7% compared to October 2021.
“Throughout the past year, rent increases have been occurring not just in the city of Tampa, but across the entire state,” ApartmentList reported. “Of the largest 10 cities that we have data for in Florida, nine of them have seen prices rise.” Read the full article.
Watch GTR’s latest housing market update here, released yesterday, November 30.