In 2022, interest rates skyrocketed putting some much-needed pressure on the housing market after home prices hit record highs; and since December, mortgage rates have been on a steady decline. As of last week, the 30-year fixed-rate inched closer to 5%, at 6.09%, down from 6.13% the week prior. This is almost one point lower than the highs we reached in October 2022 at 7.08%.
Last week, the Fed raised interest rates by another quarter point, the eighth increase since March 2022. We don’t suspect this will be the last increase. Inflation is easing but still high enough to require further rate hikes.
“While mortgage rates have been trending lower, rates are still higher than 12 months ago, but some experts anticipate that the downward pressure on rates will provide opportunities for buyers,” reports HousingWire. “The 10-year Treasury note, which dictates mortgage rate movements, dropped to 3.39% on Wednesday [February 1]. The rate was 3.43% in mid-January when the Bureau of Labor Statistics released the Consumer Price Index for December, which showed a decline for six consecutive months.
Fannie Mae suggests rates will still be around 6.1% at the end of 2023, although they could dip lower.
Realtor.com’s Senior Economist, George Ratiu, suggests, “the Fed is poised to continue pushing the funds rate higher this year in order to bring inflation near the 2% target…for buyers and sellers, this signals an additional adjustment in median prices in the months ahead.”
On that note, the latest 20-city index report from S&P Dow Jones Indices (released late January) showed home prices year-to-year were up 7.7% but month-to-month were down 0.6% from the month before. Although for Tampa, the study found a 1% price drop month-to-month and 16.9% increase year-to-year.
“As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices,” said Craig J. Lazzara, managing director at S&P DJI. “Economic weakness, including the possibility of a recession, would also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may continue to weaken.”
In other news, the U.S. Department of Treasury has recognized Hillsborough County government for its, “outreach strategy to mitigate evictions during the ongoing housing crisis,” reports Tampa Bay Times. The $2.55 million will help cover rent for about 500 local families. According to the Department of Treasury, Hillsborough County’s strategy had already been shared with other municipalities as an example of best practices for the new program.