Throughout 2022, spiking mortgage rates not only weakened housing affordability, but they also led to a significant drop in homebuyer demand, sending mortgage purchase applications down 40% year-over-year in December. For the last several months, however, rates have been inching back down from peak highs, and that slight improvement may motivate buyers to ease their way back into the for-sale market, Fortune reports.
Over the past two months, the average 30-year fixed mortgage rate dropped from 7.37% to 6.09%, leading to a slight uptick in demand, though housing experts say home prices will need to fall by another 6% or 7% to boost affordability and sustain normal levels of demand.
Through October, the Case-Shiller National Home Price Index has U.S. home prices down 2.4% from the June 2022 peak. In 2023, Capital Economics expects U.S. home prices to fall 6% while the average 30-year mortgage rate slips to 5.75% by year end. Peak-to-trough, Capital Economics expects U.S. home prices to fall between 8% to 10%.
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