According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 6.48 percent in the first week of 2023.
“Mortgage application activity sunk to a quarter century low this week as high mortgage rates continue to weaken the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”
Khater continued, “Homebuyers are waiting for rates to decrease more significantly, and when they do, a strong job market and a large demographic tailwind of Millennial renters will provide support to the purchase market. Moreover, if rates continue to decline, borrowers who purchased in the last year will have opportunities to refinance into lower rates.”
Nadia Evangelou, The National Association of Realtors senior economist & director of real estate research commented, “Mortgage rates started the new year near the 6.5% threshold. According to Freddie Mac, the 30-year fixed mortgage rate rose to 6.48% from 6.42% in the last week of 2022. Although rates are more than double a year ago, rates will likely stabilize below 6% in 2023 as inflation will continue to slow down in the following months. But who can afford to buy a home now? Shifting buyer demographics may have vast implications for the real estate market in the upcoming years. With the qualifying income near the $100,000 threshold, 32% of all households and 15% of all renters can currently afford to buy the median-priced home. Most of these eligible households are Gen Xers as their median age is 51, they are married couples (73%), they have earned at least a bachelor’s degree or higher educational attainment (61%), and most of them live in the big city centers such as New York, Los Angeles, and Chicago where housing is even more expensive. While sellers typically live in their homes for about 10 years, most of these eligible households have already spent nearly 13 years in their homes. This could be an indicator that some of them may decide to purchase a home soon. Looking at affordability conditions by race or ethnic group, nearly half of Asian Americans can afford a median-priced home, followed by White Americans (35%). In contrast, 24% of Hispanic and less than 20% of Black Americans can accomplish the American Dream. While housing affordability will be the main driver of the real estate market in 2023, Black Americans may fall further behind on homeownership.
Freddie Mac News Facts:
- 30-year fixed-rate mortgage averaged 6.48 percent as of January 5, 2023, up from last week when it averaged 6.42 percent. A year ago at this time, the 30-year FRM averaged 3.22 percent.
- 15-year fixed-rate mortgage averaged 5.73 percent, up from last week when it averaged 5.68 percent. A year ago at this time, the 15-year FRM averaged 2.43 percent.