Mortgage Rates Unexpectedly Shift Direction—Is it Here to Stay?

After experiencing seven consecutive weeks of ascent, mortgage rates have encountered a noteworthy shift, with the average rate for a 30-year fixed-rate mortgage dropping to 7.76% as of November 2, as reported by Freddie Mac.

This adjustment coincides with the Federal Reserve's announcement on November 1 to refrain from raising benchmark interest rates as part of its ongoing battle against inflation.

Sam Khater, the chief economist at Freddie Mac, commented on the situation, saying, "Once again, the Federal Reserve has chosen not to increase interest rates, although they haven't completely ruled out the possibility of a hike before the year's end.

While any drop in mortgage rates is welcome news for homebuyers, last week’s rate of 7.79% still hovers at a high not seen since 2000.

In addition to the challenges posed by high mortgage rates, prospective homebuyers are facing the hurdle of soaring home prices, which maintained a nationwide median of $425,000 throughout October.

Moreover, for the week ending on October 28, home prices recorded a 1.2% increase, marking the most significant rise in 25 weeks compared to the same period the previous year.

Realtor.com data scientist Sabrina Speianu, in her recent analysis, attributes this sustained price growth to the ongoing scarcity of existing homes available for purchase. She notes, "Persistent high demand continues to outstrip the limited supply of homes."

While home prices have remained relatively stable since mid-July, they are not in decline. Consequently, while prices are not skyrocketing, there is some modest relief in the real estate market's steady pricing.

The housing market's not-so-secret recipe for success? A substantial influx of available homes for sale.

On a national scale, the number of homes on the market decreased by 1% during the week ending October 28, compared to the same period the previous year, marking the 19th consecutive week of diminishing property listings.

Sabrina Speianu explains, "While the usual seasonal increase in inventory that typically benefits buyers is occurring, from a broader economic perspective, the housing market remains inadequately supplied."

A Glimmer of Hope: A Sudden Surge in New Listings

Despite the shortening days, there is a ray of optimism: New property listings increased by 5.6% for the week ending October 28 compared to the same time last year.

"As of mid-2022, new listings had been consistently lower than the previous year, as homeowners with low-rate existing mortgages chose not to move due to mortgage rate lock-in effects," Speianu notes. "This past week saw an abrupt reversal in this trend."

However, whether this trend will endure remains uncertain.

"While newly listed homes for the most recent week exceeded last year's figures, the overall pace of listing activity still significantly lags behind the pre-pandemic levels," Speianu emphasizes.

Buyers Must Act Swiftly

Buyers fortunate enough to locate a promising property in the limited inventory have little time for hesitation.

For the week ending October 28, homes spent one day less on the market compared to the previous year. The average time on the market for a typical home in October was 50 days, more than two weeks shorter than the period before the COVID-19 pandemic.