This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.
Rates are provided by Housing Wire in conjunction with Polly. Rates are updated in real-time. Polly data is calculated using actual locked rates. Rates are inclusive of locks that occur below par, at par and therefore consider discounts and rebates.
Market Commentary:
For the week of Mar 1st – Mar 7th, 30-year and 15-year interest rates decreased slightly.
“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” said Sam Khater, Freddie Mac’s Chief Economist.
How a decrease in 1% in interest rate affects housing affordability:
Regarding housing affordability per J.P. Morgan Wealth Management: The United States hasn’t plunged into a recession. Despite more than a year of high interest rates, the economy has shown resilience beyond most economists’ predictions.
The Federal Reserve (Fed) still hasn’t beaten down inflation completely, and the economy’s strength could be more long-term than a phase of the economic cycle.
U.S. home prices are currently at all-time highs, and less affordable (relative to income and mortgage rates) than at the height of the 2006 housing bubble. That’s after prices skyrocketed by about 40% during the pandemic.
The takeaway: If you are looking to buy a house in the United States, don’t wait for – or expect – a home price crash. J.P. Morgan Wealth Management does not foresee one coming (thankfully), nor do they think one is necessary to restore affordability at the national level. They think time and continued robust income growth can cure the problem on their own.
Based on current trends, housing affordability could be restored in 3.5 years:
Fed Watch:
Looking ahead, all eyes are now on the upcoming March 20th, Federal Open Market Committee (FOMC) meeting. According to the CME Group, 0.00% of forecasters predict an increase in interest rates, while 97% predict rates will remain the same. 3% of forecasters expect rates to decrease.
Market Review:
Per Black Knight's Production Metrics, the breakdown of mortgage production volume is as follows: 80.84% for purchase transactions, 15.54% for cash-out refinances, and 3.62% for rate and term refinances.
Per Black Knight 50.64% of all Retail loan production were Government Loans (FHA, VA, USDA), while 49.36% were Conventional and Non-Conforming loans.
News You Can Use:
- Former Atlanta Fed President Dennis Lockhart: June rate cut is certainly on the table
- Single-Family Production Shows Signs of Stirring Across the Nation
- Housing Inventory Just Hit a High Not Seen Since 2020—With More Lower-Priced Homes, Too
- Credit scores decrease for the first time in a decade as more borrowers fall behind on payments
- Home-Selling Sentiment Moves Higher Ahead of Spring Homebuying Season
- Bad news: The new FICO score changes could impact the credit cards you qualify for
- The New Era in Mortgage Credit Risk
*Communication is intended for Industry Professionals only and not intended for Consumer Distribution
Interest rate and annual percentage rate (APR) are based on current market conditions as of 03/07/2024, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 03/07/2024 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac's economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac's business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an "as is" basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.
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