Mortgage rates fell for a fifth straight week as the U.S. economy slowed in recent weeks and inflation showed further signs of slowing. The average 30-year fixed-rate mortgage reported by Freddie Mac last week fell another seven basis points (bps) compared to the previous week, reaching its lowest level since mid-September.
A statement from Freddie Mac said: “Market sentiment has changed significantly over the last month, resulting in a continued decline in mortgage rates. The current trend in interest rates is an encouraging development for potential homebuyers, as purchase application activity recently increased to the same levels as mid-September, when interest rates were similar to today's levels.
“The slight increase in demand last month,” Freddie Mac reported, “suggests there will likely be more competition in a market that continues to lack inventory.”
The Federal Housing Agency (FHA) also announced an increase in conforming loan limits in 2024 as interest rates continued to decline for the fifth straight week.
Tight supply and high borrowing costs are once again slowing the real estate market this year. But with credit limits rising and mortgage rates falling, more people should be able to afford to buy a home, and the market is expected to turn around in the first quarter of next year, according to a report from the California Association of Realtors (CAR). .
The rise in consumer confidence reported last month is another indication of a strong economy as the Fed continues to reduce inflation, the report added.
While many economists expect a recession by 2024, CAR said, most of these economists expect only a mild recession.
The Federal Housing Finance Agency (FHFA) reported last week that the maximum base loan limit for single-family homes will increase 5.6% to $766,550 in 2024 from $726,200 in 2023.
In California and New York, where costs are significantly higher, those higher loan limits will increase next year to $1,149,825, from $1,089,300 this year.
A conforming loan limit determines the maximum size of a mortgage that Fannie Mae and Freddie Mac can purchase or “guarantee.”
Conforming loans typically have lower interest rates than non-conforming loans, so raising limits next year is likely to benefit many home buyers in California, the CAR report said, especially since home prices are expected to rise moderately in 2024.
With interest rates falling rapidly in recent weeks, the market could become volatile, CAR said, and rates could rise again in the near future.
In fact, the 10-year Treasury yield rose on Monday as investors continued to speculate about the Fed's next move.
According to HousingWire.com, home loan applications rose 0.3% in the week ending November. 24 compared to the previous week, according to the Mortgage Bankers Association (MBA).
Mortgage rates for the 30-year fixed loan averaged 7.29% in November The number of purchase applications was 5% higher (seasonally adjusted) than a week earlier, but was almost 20% below the previous year's level.
The increase in applications last month was encouraging, CAR said, and the market “will hopefully continue to recover in the final month of the year,” the report said.
Adding to the hopeful economic outlook, consumer confidence rose after falling for three consecutive months and remained near its recent low.
The Conference Board's index rose to 102.0 in November from a revised 99.1 in October, but the latest monthly reading was still the second-lowest reading of the year. Consumers were generally more positive last month, with 19.8% of them saying business conditions were good, up slightly from 18.3% in October.
As the Conference Board recently reported: “Consumers were less pessimistic about near-term business conditions in November, as 17.3% of consumers expected business conditions to improve, up from 15.5% in October, and 19.5% expected business conditions to worsen expected.”, decreased from 20.9%.
At the same time, consumers' assessment of the short-term labor market outlook was slightly more optimistic in November: 16.1% of consumers expect more jobs to be available, up from 15.3% in October, while 19.6% expect fewer jobs decreased slightly from 19.7%.
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