The 30-year fixed-rate mortgage (FRM) stabilized in the first week of 2024, increasing just 0.01% compared with the last week of 2023. According to the Freddie Mac Primary Mortgage Market Survey, the 30-year FRM averaged 6.62% as of Jan. 4. In addition to stabilizing on a week-over-week basis, the average is in line with the mortgage rate from the same week in 2023, when it averaged 6.48% according to Freddie Mac.
“Between late October and mid-December, the 30-year fixed-rate mortgage plummeted more than a percentage point. However, since then rates have moved sideways as the market digests incoming economic data,” says Freddie Mac chief economist Sam Khater. “Given the expectation of rate cuts this year from the Federal Reserve, as well as receding inflationary pressures, mortgage rates will likely continue to drift downward as the year unfolds. While lower mortgage rates are welcome news, potential home buyers are still dealing with the dual challenges of low inventory and high home prices that continue to rise.”
The downward trend of mortgage rate movement toward the end of 2023 has contributed to improved affordability conditions for buyers. According to data from Redfin, the median U.S. mortgage payment was $2,361 during the four weeks ending Dec. 31, down 14% from October’s all-time high. The median payment in December represented the lowest level in nearly a year, according to Redfin.
Redfin’s Homebuyer Demand Index was up 10% month over month in December, while pending sales were down just 3% annually, the smallest decline in two years.
Despite the normalization of mortgage rates, mortgage applications have not yet responded with positive changes, according to the Mortgage Bankers Association (MBA). The MBA’s Weekly Mortgage Applications Survey found applications decreased 9.4% from two weeks earlier for the week ending Dec. 29.
“Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023,” says MBA vice president and deputy chief economist Joel Kan. “The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response, with the overall level of purchase activity 12% lower than a year ago. Refinance applications were still at very low levels but were 15% higher than a year ago.”
According to the MBA, the refinance share of mortgage activity decreased to 36.3% of total applications from 39.4% in the previous week. The adjustable-rate mortgage share of activity decreased to 6% of total applications. The FHA share of total applications decreased to 14.5% from 15%.
“The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months to come,” says Kan.
