Homebuyers are on alert
This week’s mortgage rates witnessed a slight adjustment amid expectations of economic shifts, particularly after signs of cooling in the manufacturing sector, as noted by NerdWallet mortgage expert Holden Lewis, with “the economic picture [to] become clearer over the next few days.”
For the week ending February 29, the average rate for a 30-year fixed mortgage inched up to 6.96% APR, marking a slight increase from the week before, as per the data shared by NerdWallet from Zillow. The 15-year fixed mortgages saw a barely noticeable uptick to 6.19% APR. In contrast, the five-year adjustable-rate mortgages enjoyed a decrease, dropping 10 basis points to an average of 7.76% APR.
Market watchers have kept a close eye on various economic indicators throughout the week, especially inflation and job data, which traditionally influence mortgage rates. The report for January matched expectations with a 2.8% year-over-year increase and a 0.4% rise from the previous month.
“Meantime, every decrease in mortgage rates is accompanied by a surge of loan applications. This implies that there’s plenty of pent-up demand for homes, and buyers are sensitive to small changes in rates,” Lewis said.
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Housing prices remain a crucial factor in home affordability, with the latest figures presenting a mixed bag. According to the Census Bureau, the median price of newly constructed homes in January dropped by 2.6% year-over-year to $420,700, indicating a shift towards building more budget-friendly homes. In contrast, the resale market saw prices climbing, with the median price of existing homes rising by 5.1% to $379,100, as reported by the National Association of Realtors (NAR).
NAR’s chief economist Lawrence Yun expressed concerns over the rapid price increase in the resale market outpacing wage growth, marking it as “unhealthy” and reflective of the ongoing housing shortage in the country: “January was the first time in more than a year that existing home prices went up faster than wages.”
Looking forward, mortgage rate projections for February remain uncertain, with expectations leaning towards stability pending further indications from the Federal Reserve regarding interest rate adjustments.
Industry forecasters, including those from the Mortgage Bankers Association and Fannie Mae, are optimistic that rates will align with a downward inflation trend, contingent on the Fed’s success in stabilizing inflation at its 2% goal.
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