11.16.23 Mortgage rates dip to lowest level since September

Mortgage interest rates declined for the third straight week, setting up the possibility of a small end-of-year rally for home sales.

The 30-year fixed-rate mortgage averaged 7.44% in Freddie Mac’s weekly survey, which is the lowest level since late September. The 15-year fixed-rate also dropped slightly, averaging 6.76% for the week.

That combination of economic strength, lower inflation and lower mortgage rates will likely bring potential homebuyers into the market, said Sam Khater, Freddie Mac’s chief economist.

Lisa Sturtevant, chief economist for Bright MLS, agreed that more homebuyers may take advantage of the current conditions before year-end — but could end up disappointed because of the lack of inventory.

“For those homebuyers who can wait, the spring will bring more new listings and lower mortgage rates,” Sturtevant said.

If the economic data continues to trend in the same direction, another rate hike would be far less likely, said Realtor.com Economist Jiayi Xu. She expects mortgage rates to continue their steady decline in the final weeks of the year.

For NAR Deputy Chief Economist Jessica Lautz, Pitbull lyrics — “It’s going down, I’m yellin’ timber” — came to mind when looking at the downward trend in mortgage rates, which she believes will build momentum. And although inventory is low right now, homebuyers may benefit from less competition, she said.

“[Late fall] might be a calmer season to home shop before rates fall into the 6% range in spring and pent-up demand floods into the market,” said Lautz in response to the rate drop.

Even with a steady decline in mortgage rates, confidence continues to erode for the nation’s homebuilders. The National Association of Homebuilders’ confidence index fell six points to 34 in November. It has fallen 22 points since July. But if mortgage rates continue to trend down and existing-homes inventory remains low, confidence should begin to rise in December, said Robert Dietz, NAHB chief economist.

Builders may be uncertain, but homebuyers appear to be feeling more confident, with mortgage applications rising 2.8% this week, according to the Mortgage Bankers Association. Applications are still sitting at relatively low levels, however, as mortgage rates above 7% make for a challenging market, said Joel Kan, MBA’s deputy chief economist.