After the average 30-year fixed mortgage rate peaked in November, lower rates have contributed to an improving housing market, Redfin said in a report published January 25. 

The average 30-year fixed mortgage rate declined to 6.15% from its November high, marking the largest 10-week decline since 2009, Redfin reported.

As a result, the typical homebuyer’s mortgage payment decreased by about 10% or $180, Redfin said in its report. In addition, pending home sales increased by 3% in December from November, the first month-over-month increase in 14 months. The firm also noted that mortgage applications were up 28% from early November. 

"Homebuyers are starting to feel more confident as mortgage rates tick down closer to 6% than 7% and the overall economy chugs along with surprising resilience, especially in the labor market," Redfin Economics Research Lead Chen Zhao said in a statement. "Steadily cooling inflation is likely to prevent mortgage rates from jumping back up."

If you’re ready to jump into the homebuying process, you could consider comparing mortgage rates. You can visit Credible to compare mortgage rates from different lenders at once, without affecting your credit score.

ANOTHER WEEK OF DECLINING MORTGAGE RATES FUELS HOMEBUYER DEMAND: FREDDIE MAC

As mortgage rates decreased in January from their November high, potential buyers returned to the housing market and new ones entered, according to Redfin. 

The seasonally-adjusted Redfin Homebuyer Demand Index, the mortgage brokerage’s measure of requests for home tours and other homebuying services from Redfin agents, increased 6% from the month prior during the four weeks ending January 22. Google searches for "homes for sale" were up about 40% from their November low in the week ending January 21, Redfin reported. 

"I’ve seen more homes go under contract this month than in the entire fourth quarter," California-based Redfin agent Angela Langone said in a statement. "Listings that were stagnant in November and December are suddenly getting one to two offers. I’m getting texts and emails from prospective buyers now that the new year is in full swing and the holidays are behind us. Mortgage rates aren’t stopping people as much as they were at the end of 2022 now that they’re down from their peak and sellers are more willing to negotiate. Some buyers are having luck winning a home for under asking price, especially if it has been on the market for several weeks, but those days may be numbered."

If you’re ready to begin the homebuying process, you can consider comparing mortgage rates. You can visit Credible to get your personalized mortgage rate, without affecting your credit score.

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Even though there have been positive signs that indicate a housing market recovery in recent weeks, the trend may reverse if inflation fails to stay on a downward path, Redfin analysts forecasted. 

"The housing market rebound could stall or slip if the progress the Fed has made toward cooling inflation slows or reverses course," Redfin said in its housing market report. "The labor market is likely to weaken this year, perhaps to the point where we’re in a recession. Higher unemployment will hurt the housing market recovery, but that damage may be offset by any rate cuts from the Fed." 

The Federal Reserve increased its benchmark interest rate by 25 basis points during its February meeting. The move represented another easing of interest rate hikes. In December, the Fed announced an interest rate increase of 50 basis points after four consecutive spikes of 75 basis points. 

The Fed is aiming for an inflation level of 2%. While recent inflation rates haven’t reached that target level, reports have suggested it is cooling off. Inflation rose 6.5% year-over-year in December, as measured by the Consumer Price Index (CPI). That’s a slowdown from the 7.1% increase in November. And some experts have forecasted that it will continue to cool down following its highs in 2022. 

"We believe inflation peaked in 2022 at its highest level in four decades and expect further deceleration throughout the year," First National Bank of Omaha (FNBO) said in its 2023 Outlook report. 

If you’re considering purchasing a home, you could consider comparing mortgage rates. You can visit Credible to speak with a mortgage loan expert and find an offer that’s right for you. 

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