The combination of a record-high number of jobs and inflation rising above expectations drove up mortgage rates this week (Feb 16th). According to Freddie Mac, the average rate on a 30-year fixed mortgage ticked up to 6.32% from 6.12%. At this rate, Americans need to put at least 18% down on the purchase of a median-priced home if they don’t want to be cost-burdened.
Nevertheless, the inflation rate will ease in the second quarter of the year. Rent prices are a large contributor to inflation, representing about 40% of the CPI bucket. In the meantime, private sector data indicates that rent price growth has slowed down starting from the second quarter of 2022. However, government data, which relies on a survey, shows that rent growth continues to accelerate as most renters report the rent they locked in earlier. This means that rent changes take several months to be reflected in government data. With a one-year lease being one of the most popular leases, the decelerating trend in rent price growth may occur sometime in the second quarter of the year. This could help cool inflation further and stabilize mortgage rates below the 6% threshold this year. National Association of Realtors forecasts mortgage rates to average 5.7% in 2023.
If you have any questions, please give us a call today!
Hutch & Howard