Mortgage rates continue to dictate movement in the housing market in 2023, and the latest news is positive. Mortgage rates continue their downward trend with the new year in full swing. Providing insight on what the latest moves by the Fed may mean for buyers, sellers and this month’s economic news is The Agency’s preferred mortgage partner, Cross Country Mortgage.
Mortgage Rate Outlook
As expected, this past Wednesday, on Feb 1st, the Fed hiked the Fed Funds Rate a quarter of a point, however their commentary on inflation, recession, job growth and upcoming hikes was the focus of their session. Although the Fed signaled that there is still a need for ongoing rate increases, mortgage-backed securities reacted positively to the news and mortgage rates dropped. This aligns with our previous predictions and the overall trend that mortgage rates will follow inflation to the downside over the course of a few months and throughout 2023. Below are updated rates and commentary on the unemployment number which pushed mortgage rates a little higher this week after the market digested this strong job growth in the economy.
Below are the average rates as of 2/7/2023
It’s expected the Fed will hike the Fed Funds Rate another .25BPS at the next meeting on March 22, 2023.
Recently, we learned that home price growth slowed as measured by the S&P Corelogic Case-Shiller Index. Nationwide, home prices posted an annual gain of 7.7% in November of 2022, down from 9.2% in October. January was the eighth consecutive month of shrinking gains. Other highlights include:
- The 20-city home price index recorded a 6.8% year-over-year gain, and the 10-city composite index recorded a 6.3% annual gain.
- Miami and Tampa had the highest annual price gains at 18.4% and 16.9%, respectively.
- San Francisco had the first negative result in more than 10 years at -1.6%.
- The rise in pending home sales was driven by a 6.4% increase in the West and a 6.1% pickup in the South.
- Mortgage rates, which play a significant role in home sales, have been declining and are contributing to the stabilization of the market.
Unemployment lowest since 1969
The jobs report released this past Friday, February 4th, was exceptional.
The US economy saw a record decrease in unemployment with the addition of 517,000 jobs in January and a drop in the unemployment rate to 3.4%, the lowest it has been in over 50 years. The numbers, which were more than double the predicted 190,000, came as a surprise as employers are adding jobs faster than expected, despite the Federal Reserve’s efforts to slow down the labor market. The report also showed that in January, average hourly earnings increased by 0.3% or 4.4% compared to the previous year. While strong employment has the potential to boost housing activity, factors such as weak wage growth and rising inflation may limit investment.
The Federal Reserve’s monetary policy officials may be close to ending their tightening cycle, but the recent job numbers make it likely that the Fed will keep interest rates higher for a longer period. The result of this news on Friday pushed Mortgage rates slightly higher to their highest levels in the past month but we do foresee Mortgage rates continuing to be volatile but overall, falling over the course of the year.
Benefits to Agents, Buyers & Sellers
The economic shock caused by spiked mortgage rates has been declining consistently since December, thanks to the mounting signs of decelerating inflation. As the financial markets loosen, we are seeing mortgage rates fall, making the housing market more accessible. The 30-year Fixed is at its lowest level since September 2022, which is a result of Federal Chair Jerome Powell’s shift in language regarding inflation. As a result, lower rates drive more interest from potential buyers. Firms like CoreLogic and Zillow predict the tight inventory environment will contain the home price correction going forward.
Thinking of making a move? Connect with your agent and our team at Cross Country Mortgage to learn more.