Blog posted On January 12, 2023
Home buyers are embracing the new year with a new hope. Mortgage application submissions are up, sales prices are set to cool, and more sellers are offering concessions. On top of that, mortgage rates are expected to continue trending lower over the next 12 months. Though last year was a challenge for many, it’s looking like the force will be strong with hopeful buyers this year.
If you’re looking to buy, several factors are on your side.
Inflation on the consumer price index has cooled for the past six months. Why does this matter? Because inflation indirectly impacts rates. Mortgage rates are generally tied to the bond market, and the bond market hates inflation. This is part of the reason rates trended higher last year. However, things are looking up. Inflation has been steadily cooling in recent months, taking some of the pressure off of the Federal Reserve and interest rates. In 2022, the Fed aggressively attacked high inflation levels by raising the benchmark interest rate at a record pace. This has indirectly affected mortgage rates as well. While more rate hikes are coming this year, it’s likely they will continue to slow. Last month, the Fed finally tapered back from the previous 0.75% hikes and reduced the increase to 0.50%. Consequently, mortgage rates have been much lower than they were in mid-to-late October, which can save buyers hundreds of dollars per month. Over the next 12 months, mortgage rates are expected to continue trending lower. The latest MBA mortgage forecast expects rates to end the year around 5.2%, though this prediction depends on several factors.
Buydowns, discount points, and other rate-friendly programs have become increasingly popular over the past few months. According to a report by Redfin, 41.9% of home sellers gave concessions in the fourth quarter of 2022 – a record high. These concessions forms including money for repairs and mortgage rate buydowns. Another popular option for buyers who are trying to ‘wait it out’ until rates drop further is a Rate Rebound program. Rate Rebound is our unique program that lets you buy now at the current rate and refinance later with no lender fees if the market rates fall.* Plus, we offer a $1,000 credit for other non-lender fees.
Home price appreciation has been cooling for several months. Most recently, the Case-Shiller home price index posted a 0.8% monthly decline in October. The prices of existing homes are expected to fall by roughly $13,000 while the price of new homes is expected to fall by roughly $12,000. This in combination with lower-trending rates are good signs for buyer affordability.
Inventory has been a huge restraint in recent years as the number of available homes has brushed all-time lows. Luckily, this number is on the rise, which could further help ease up the pressure on home prices. At the end of 2022, the number of active listings was up by 54.7% compared to the year prior, according to Realtor.com’s December Housing Report. This means less competition, a likelihood of more concessions, and hopeful easing of home prices.
A combination of these factors has offered a breath of much needed fresh air for home buyers. According to Fannie Mae’s Home Purchase Sentiment Index (HPSI), consumer confidence to sell or buy a home rose in December by 3.7 points, largely due to expectations that mortgage rates and home prices may decrease this year. The percentage of buyers who think it’s a good time to purchase a home increased by 5% in December. If you’re thinking of selling, don’t worry. More than 50% of home sellers still think it’s a good time to take action.
If you’re getting excited about buying this year, here’s what you can do next:
It’s going to be a great year!
*CMG Home Loans will cover all customary lender fees which are processing fee, administrative fee, tax service fee, appraisal fee and credit report fee. In addition CMG Home Loans will also credit the borrower up to $1,000 towards additional third-party fees. This offer does not cover discount points. Credit cannot exceed total fees. Rate Rebound is only valid on future conventional conforming, government, and jumbo loans in our retail channel (future Construction Loans, All in One, HELOCs, Bond or HFA loans are excluded). There may be additional restrictions based on investor. Offer may not be redeemed for cash or credit and is nontransferable. Offer cannot be retroactively applied to any loans. Offer may not be used with any other discounts, promotions or interest-only/buy-down and second lien products. This offer is subject to changes or cancellation at any time at the sole discretion of CMG Home Loans. Additional restrictions/conditions may apply. This is not a commitment to lend and is contingent on qualification per full underwriting guidelines. Program will be available on loans disclosed on or after 11/1/22. Program is applicable for refinances 6 months after closing up to 5 years from original note date and with a net tangible benefit which includes a rate reduction of 0.5%, going from an ARM to fixed rate, reducing loan term, movement to a more stable product, or a lower principal and interest payment. By refinancing the existing loan, the total finance charges may be higher over the life of the loan.