As a market correction ripples through the United States, economists are forecasting price drops of 10% or 20% from peak levels, but according to Bloomberg, even modest declines could cause prices to stabilize in the year ahead. After peaking at 7.3% in October, the average mortgage rate was 6.13% last week. Also, as sellers continue to lower their asking prices and wage growth accelerates, monthly payments are declining and an affordability gap is shrinking.
Gradual drops in the 30-year fixed-rate mortgage over the past couple of months have led to an uptick in mortgage purchase applications, evidence that rates of 6% or lower in 2023 could alleviate affordability concerns and speed up sales.
The rise in mortgage rates has hurt sales activity as many owners decide not to sell at the lower prices needed to move homes when mortgage rates are above 6%. But we've also seen that even as mortgage rates remain high, small declines in the rate will lead to more buyer activity. As rates have eased over the past couple of months, mortgage purchase applications rose five of the past six weeks, and Google searches for "homes for sale" have picked up a bit.
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