This week, mortgage rates dropped for all types of mortgages, including the 30-year fixed rate mortgage, which reached a new low of 6.46%. This is the lowest it has been since September 2022, and it is significantly lower than the high of 7.33% seen in November. Additionally, experts predict that rates will continue to decrease as inflation slows in the near future.

You can find the current mortgage interest rates as of January 19, 2023:

  • 10-year fixed interest rate: 5.88% (down 0.19% since January 12)
  • 15-year fixed interest rate: 5.72% (down 0.23% since January 12)
  • 20-year fixed interest rate: 6.53% (down 0.15% since January 12)
  • 30-year fixed interest rate: 6.46% (down 0.17%)
  • 30-year jumbo loans: 6.46% (down 0.17% since January 12)
  • 30-year FHA loans: 5.76% with 0.06 point (down 0.09% since January 12)
  • 10/1 ARM: 5.92% (down 0.06% since January 12)
  • 7/1 ARM: 5.52% (down 0.09% since January 12)
  • 5/1 ARM: 5.44% (down 0.07% since January 12)
  • VA purchase loans: 5.91% with 0.05 point (down 0.09% since January 12)

Mortgage rates are forecasted to decrease throughout 2023 as inflation slows and the economy weakens. The Federal Reserve’s monetary strategy, which included several rate hikes and a tightening of the central bank’s balance sheet in the past year, led to a spike in mortgage interest rates in 2022. 

However, the Fed’s policy decisions for this year are expected to change as inflation declines. This shift has already begun, with Fed officials agreeing to slow down the pace of rate hikes in December.

According to economists surveyed by Reuters, the Fed plans to raise the federal funds rate by 25 basis points at the first two policy meetings of 2023 before keeping rates stable for the rest of the year, which is a significant contrast to the seven rate hikes implemented in 2022, four of which were 75 basis points. 

If the central bank does slow its rate hikes as predicted, the terminal rate could reach 4.75%-5% by March. Some investors suggest that the Fed may even lower the rate depending on the state of the economy.

Indicator of the Week: A Drop in Home Prices

The National Association of Realtors reports that the median price for existing home sales has dropped by tens of thousands of dollars over the past six months, from a peak of $413,800 in June 2022 to $366,900 currently. 

Although the rate of yearly home price appreciation has slowed to 2.3% since May, the current home price is the highest recorded for the month of December. Lawrence Yun, the chief economist of NAR, notes that home prices tend to be lower during the final month of the year. 

He also states that while half the country is experiencing price declines, the other half is experiencing price increases, particularly in the luxury market. As prices continue to moderate in the upcoming months, it is likely that annual home price changes will become negative for the first time in nearly 11 years. It is uncertain whether existing home sales prices will reach the levels seen last spring when mortgage rates were at 4%-5% with current 6% rates.

According to Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors (NAR), there is reason to believe that home prices will continue to moderate.

Sellers are becoming more willing to negotiate as homes remain on the market for longer periods of time. In December, the typical home was on the market for 26 days after being listed for sale, an increase from 24 days in November and 21 days in October. 

Additionally, there are fewer offers per listing. Now the typical seller receives just a couple of offers compared to the four offers received in the previous year when buyers were eager to take advantage of the historically low 3% mortgage rates. As a result, sellers are often forced to reduce their initial asking price by an average of 12% for homes that remain on the market for more than 30 days, and this price cut increases to 15% after four months on the market.

This, in turn, makes monthly payments more affordable for prospective homebuyers. However, there is still a low inventory of homes in relation to home prices, making it difficult for even high-income earners to find an affordable home. Additionally, home buying conditions can vary greatly depending on the regional market.