Why FHA Home Loan Rates Are Recovering
December 14, 2023
At press time, there is a lot of December left to go, and understandably, some might think our headline is premature. But after briefly flirting with the 8% range, sources, including NBC.com, report December has the makings of a housing turnaround.
NBC and Redfin report interest rates down to slightly above the 7% mark after hitting a major spike to 8% in October. Rates had not risen that high in well over two decades.
NBC News reports, “The interest rate on a 30-year fixed mortgage is down to 7.03%, according to government-backed lender Fannie Mae,” with mortgage applications up (presumably due to the lower rate) by some 15%. That after reaching major lows in the previous month.
Housing Market Recovery?
Fed Actions to Raise Interest Rates in 2022 and 2023
The Federal Reserve took measures to control inflation, including raising the cost of lending money by increasing the Federal Funds Rate. That rate, previously just above 0%, has risen as high as 5.5%, one important factor that affected how and when people decided to commit or walk away from a loan.
Those higher rates made people with lower rates stop plans to refinance, and many borrowers withdrew from the housing market over rising rates and costs. And that wasn’t the only factor affecting the market since 2022.
When it comes to the supply of available homes for sale, the more power the seller has over the transaction's outcome (due to high competition for a limited inventory of homes), the less borrower-friendly the marketplace. And 2022 was a seller’s market.
Those conditions seem ripe for continued incremental change as we move into the new year.
What’s Ahead for 2024?
According to NBC and Redfin, only sustained housing inventory can fix conditions to prevent them from sliding back into a seller’s market.
NBC.com notes the “only thing” that will help “a sustained change” is more homes for sale. According to Redfin, “That's starting to happen in some markets.”
The key is to watch a trend persist. Lower rates for a day, a week, or a month may not be enough to label an actual recovery. But when rates are consistently lower (say, six weeks or longer), that may be the best indication that a recovery is truly underway.
Some borrowers have to act now. Others can afford to wait.
But no matter when you decide to reenter the housing market as a buyer, be sure to shop aggressively for a participating FHA lender willing to work with your circumstances, your FICO scores, and your down payment needs.
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NBC and Redfin report interest rates down to slightly above the 7% mark after hitting a major spike to 8% in October. Rates had not risen that high in well over two decades.
NBC News reports, “The interest rate on a 30-year fixed mortgage is down to 7.03%, according to government-backed lender Fannie Mae,” with mortgage applications up (presumably due to the lower rate) by some 15%. That after reaching major lows in the previous month.
Housing Market Recovery?
- Applications may rise based on a perception that things are improving.
- That perception is helped along by the notion that the Fed may be done raising interest rates for now.
- A perceived or actual housing market recovery, however slow, is likely to encourage some house hunters to move quickly.
Fed Actions to Raise Interest Rates in 2022 and 2023
The Federal Reserve took measures to control inflation, including raising the cost of lending money by increasing the Federal Funds Rate. That rate, previously just above 0%, has risen as high as 5.5%, one important factor that affected how and when people decided to commit or walk away from a loan.
Those higher rates made people with lower rates stop plans to refinance, and many borrowers withdrew from the housing market over rising rates and costs. And that wasn’t the only factor affecting the market since 2022.
When it comes to the supply of available homes for sale, the more power the seller has over the transaction's outcome (due to high competition for a limited inventory of homes), the less borrower-friendly the marketplace. And 2022 was a seller’s market.
Those conditions seem ripe for continued incremental change as we move into the new year.
What’s Ahead for 2024?
According to NBC and Redfin, only sustained housing inventory can fix conditions to prevent them from sliding back into a seller’s market.
NBC.com notes the “only thing” that will help “a sustained change” is more homes for sale. According to Redfin, “That's starting to happen in some markets.”
The key is to watch a trend persist. Lower rates for a day, a week, or a month may not be enough to label an actual recovery. But when rates are consistently lower (say, six weeks or longer), that may be the best indication that a recovery is truly underway.
Some borrowers have to act now. Others can afford to wait.
But no matter when you decide to reenter the housing market as a buyer, be sure to shop aggressively for a participating FHA lender willing to work with your circumstances, your FICO scores, and your down payment needs.
------------------------------
RELATED VIDEOS:
Protect Yourself Against Identity Theft
A Streamline Refinance Simplifies the FHA Loan Process
Principal Payments and Your FHA Loan
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