Reports have shown that inflation might have already peaked. This has caused the mortgage rates to start to fall back towards 5%. The week ending in August 18th showed 30-year fixed-rate mortgage at an average of 5.13% according to Freddie Mac. The week prior was an average 5.22% and the year prior the 30-year was 2.86%.
“Inflation appears to be beyond its peak, which has stopped the rapid increase in mortgage rates that the housing market was experiencing earlier this year,” said Sam Khater, Freddie Mac’s chief economist.
The higher mortgage rates hurt the housing market this summer which rose to a high of 5.81% in mid-June. Sales dropped on home sales for both new homes and existing homes causing a dip in mortgage applications. The last week in August 2022 mortgage applications were at their lowest levels since 2000.
“The market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability,” said Khater. “As a result, over the rest of the year purchase demand likely will continue to drag, supply will modestly increase, and home price growth will decelerate.”
“Home purchase applications continued to be held down by rapidly drying up demand, as high mortgage rates, challenging affordability, and a gloomier outlook of the economy kept buyers on the sidelines,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
If home prices slow in increasing and mortgage rates lower, then hopefully the housing market will bounce back. This hopefully will ring true as a year ago a a buyer could purchase a $390,000 home with 20% down on a 30 year-fixed rate mortgage and have a monthly payment of around $1,292. This same home today will cost a home buyer around $1,700 a month which is around $408 more each month.