Mortgage Market News September 2023

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Several factors may be at play that indicate that mortgage rates and the real estate market may finally stabilize. After the July 25th meeting of Federal Reserve officials (FED), their key rate rose to 5.4%. This led mortgage rates to spike to a 22-year high at 7.23% for a 30-year fixed rate loan.

According to Freddie Mac, during the week ending September 7th, rates have dropped two weeks in a row and average 7.12%. Freddie Mac is a government-sponsored enterprise that purchases and guarantees mortgages from smaller banks. Via this secondary mortgage market, they work to keep mortgage markets liquid.

Inflation Slowing

The next FED meeting will be on September 19th and they will be looking at economic data to determine if rates will need to be raised further. The good news is that inflation has been slowing, even while the Department of Labor released a report that shows unemployment is down and the labor market is strong.

The decrease in mortgage rates may be a sign that lenders are betting that another FED hike may not occur this year. With would-be sellers locked into lower mortgage rates and buyers waiting for a rate drop, fluctuating interest rates have strangled the US housing market.

An overheated labor market can drive inflation upward, increasing the likelihood of another Federal Reserve rate hike. But overall, the economy has been slowing, and as long as it continues to do so, many economists believe mortgage rates should start decreasing in the coming months.

Fall Predictions

“The housing market has shuffled along at a slow pace for more than a year now as the market waits for mortgage rates to stabilize or decline,” says data Scientist Sabrina Speianu in her analysis.

“Heading into the fall housing season, mortgage rates, home prices, and housing availability continue to remain a challenge for both homebuyers and home sellers who themselves may need to purchase a home as they sell their current one.”

With the job market robust but cooling off and inflation slowing down, “the market is not anticipating the Federal Reserve to increase rates in September and it is also less likely that they will raise rates before year-end,” predicts Speianu.

Home Prices Stable

Compared to a year ago, listings were down 8.5% for the week ending September 2nd. During June and July, home prices declined, but rose again in August to a median price in the US at $435,000. This is still lower than the median price high of June.

"Mortgage rates will continue to ebb and flow week to week, but ultimately, I think rates will stick to that 6% to 7% range we're seeing now," said Jacob Channel, senior economist at LendingTree.

Homes are still selling relatively quickly. “The gap is now only two days more than the same time last year,” says Speianu. “While the demand for homes has pulled back due to affordability constraints, there are still eager home shoppers on the market browsing through a declining inventory of homes for sale.”

Fall Interest Rates

30-year fixed-rate mortgage averaged 7.12 percent as of September 7, 2023, down from last week when it averaged 7.18 percent. A year ago at this time, the 30-year FRM averaged 5.89 percent.

15-year fixed-rate mortgage averaged 6.52 percent, down from last week when it averaged 6.55 percent. A year ago at this time, the 15-year FRM averaged 5.16 percent.

Many of the home purchases in Lake Tahoe have been cash purchases and unaffected by changing interest rates. However, for those looking to lock in a good mortgage rate, the time may be now. Contact us today for more information about the real estate market in Lake Tahoe and Truckee.