Freddie Mac Mortgage Rates – December 8, 2022
What Happened to Mortgage Rates This Week:
The Freddie Mac fixed rate for a 30-year loan declined again this week by 16 basis points to 6.33%, as investors watched for more signs of slowing inflation. This week, labor cost data provided a ray of hope as it showed that hourly compensation was lower than previously reported in the second and third quarters for all sectors except manufacturing. And anyone paying attention to the price at the pump would also have noted a decline.
What is Ahead:
Next week’s CPI data will confirm whether these trends are pervasive across the variety of goods and services consumers buy. Next week, we’ll also hear from the Fed, which is expected to announce another increase in the Fed Funds rate, but of a slightly smaller size–only 50 basis points compared with the 75 basis points in the previous four meetings. What’s less certain is how the Fed’s projections will have evolved since they were issued in September. These projections will show their expectations for economic growth and employment as well as the likely path of the Fed’s policy rate if conditions are consistent with the forecast.
What it Means:
This means that mortgage rates may continue on the volatile path seen so far in 2022 that has made it very difficult for buyers to set and maintain a home shopping budget. The typical average weekly increase in 2022 has been 17 basis points compared with just 1 to 2 basis points for each previous year dating back to 2004. And this average understates the volatility we’ve seen because there has been so much up and down this year. Looking at absolute weekly changes, the typical difference is 17 basis points in 2022, or 3 to 4 times the size of the average absolute weekly difference going back to 2014. This has made setting a home purchase budget incredibly difficult for home shoppers who have watched their purchasing power swing up and down as rates fluctuate. While recent rate movements have brought the cost of purchasing a home down relative to the recent peak in mortgage rates just one month ago by more than $185, the buyer of a median-price home for-sale today making a 10 percent down payment is looking at a monthly payment of $2,320 for principal and interest, an increase of more than $880 from last year.
As housing cost continues to be a major challenge for both buyers and renters alike, affordable midsize housing markets offer a potential refuge that workers with flexible arrangements may continue to seek out. As a result, we expect the top housing markets of 2023 to remain relatively active, even as the number of home sales nationwide is expected to decline.