Freddie Mac Mortgage Rates – December 14th, 2023
What Happened to Mortgage Rates This Week:
The Freddie Mac fixed rate for a 30-year mortgage dropped by 0.08 percentage points to 6.95 percent this week as markets absorbed the latest statements from FOMC. Despite the increase in job growth and the decrease in the unemployment rate in November, the overall trend indicates a slowdown in the labor market. Additionally, the improved Consumer Price Index (CPI) suggests that the Federal Reserve’s historic monetary tightening measures are effectively curbing inflation. Consequently, in its December FOMC meeting, the Federal Reserve opted to maintain the short-term policy rate within the range of 5.25 to 5.5 percent. Meanwhile, the Fed has released its Summary of Economic Projections, revealing a lower median expectation for the Fed Funds rate at the end of 2024, now at 4.6%, down from 5.1% in September.
What it Means for the Housing Market:
While mortgage rates have mirrored the easing in longer-term rates, their levels remain elevated. Notably, approximately two-thirds of outstanding mortgages feature rates below 4%, and over 90% have rates lower than 6%. The disparity between today’s higher market mortgage rates and the lower rates that existing homeowners benefit from on their current mortgages, commonly referred to as the lock-in effect, is expected to play a role in maintaining low inventory levels. As home shoppers compete over the still-limited inventory, prices are expected to stay elevated, maintaining affordability as a top concern. Put differently, having the ability to access a broader array of home options is a pivotal factor in the current real estate landscape. A recent study by Realtor.com discovered that flexible work modes could enable home buyers to broaden their search parameters for a more extensive selection of homes. Additionally, there is evidence indicating that individuals in the least affordable markets leverage flexible work arrangements to move out of costly urban areas, addressing affordability concerns in the process.