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Mortgage rates continue to remain near the 6% threshold. According to Freddie Mac, the rate on a 30-year fixed mortgage dropped to 6.13% from 6.15% the previous week. Mortgage rates may fall even further in the following weeks as investors expect the Federal Reserve to take a smaller rate hike in February thanks to easing inflation. In fact, this is the first time after nearly two years that the inflation rate is finally lower than it was the previous year. This means that consumer prices are higher, but they will rise at a slower pace than a year ago. At the end of 2022, the inflation rate was 6.5% compared to 7.0% in 2021.
As people realize that the 3% rates are not coming back anytime soon, mortgage applications have picked up. What should we expect from the housing market as the spring season is nearing? Generally, home sales activity increases by 33% in March compared to February, with nearly 420,000 homes sold on average in March. However, in the last couple of years, activity was even busier due to low mortgage rates. Even though rates were rising last March, many buyers were rushing to benefit from the 4% rates during that time. Given low affordability and inventory, activity may not ramp up so fast in the spring season this year, but it will definitely be busier than it currently is. Meanwhile, a stronger housing market could help the U.S. economy to skirt a recession.
