After rising precipitously during the first 6 weeks of 2022, the average 30-year fixed rate mortgage ticked down by 3 basis points in the latest Freddie Mac survey to 3.89 percent. This is only the second time in the past 10 weeks when rates have ebbed, and although the reprieve is expected to be temporary, it is welcome news for homebuyers looking to lock in current rates before they resume their uptrend. Fortunately, 10-year Treasuries also saw a small reduction in rates last week and with mortgage spreads having increased sharply since the uptrend began, the mortgage market may see rates climb more slowly when they do begin to rise.
Despite the rapid rise in interest rates so far this year, existing home sales continue to hold up well. In fact, the first four weeks of February saw more homes close in California than during the same four weeks in January. Given that January’s pace of sales was still roughly 5 percent above pre-pandemic levels, this suggests broader resiliency for the market. Sales are still down on a year-to-year basis from the nearly 15-year highs where the market began 2021 but maintaining or exceeding last month’s level despite higher rates and still-depressed inventory levels is an encouraging sign that buyer demand remains relatively robust.
The recent conflict developing between Russia and Ukraine is likely to introduce competing economic and housing market impacts in the weeks and months ahead. On the downside, this will likely introduce more inflationary pressures, as global oil supplies from Russia are impacted by sanctions. Increased financial market volatility is likely as well, which could introduce macroeconomic headwinds as consumers pull back from lost wealth and rising prices. On the other hand, global turmoil will likely increase demand for U.S. dollars and U.S. Treasuries, which could alleviate some of the recent upward pressure on interest rates and could result in less domestic inflationary pressures.
Sources: Freddie Mac, the Market Reports, Marketwatch, C.A.R. Market Minute