Mortgage rates are beginning to trend down after hitting a 20-year high and experts believe there could be a renewed interest for prospective home buyers to return to the market this spring.
Interest rates for 30-year fixed mortgages peaked in November at 7.08%. The last time rates reached more than 7% was in April of 2002, according to Freddie Mac, a private but government sponsored corporation that packages mortgages for investors to purchase. Meanwhile, home prices have slowed for the seventh straight month, a year-over-year increase of 7.7%, down from 9.2% in November, the slowest growth increase since September 2020, according to CoreLogic, which tracks housing and mortgage data.
However, by December and into January, 30-year fixed interest rates have steadily dropped from 6.49% to 6.13%, respectively and CoreLogic Chief Economist Selma Hepp said December’s falling interest rates has brought renewed optimism to prospective homebuyers.
“And if mortgage rates continue trending lower, the 2023 spring homebuying season may prove busier than initially expected,” said Hepp.
Nationwide, home prices dropped by 4% from last spring’s peak and San Francisco saw 14% declines in November since its peak earlier in the year. Comparatively, Hepp said, pandemic boomtowns Phoenix, Las Vegas and Seattle are the winners in price growth since last year.
Marla Perego, San Mateo County Association of Realtors president, said the last few weeks in some of the north county cities, such as, Daly City, San Bruno and South San Francisco have become extremely active.
“Right now I have quite a few sales, over the last three to four weeks,” said Perego. “Open houses are much better attended and see multiple offers and in some cases over-asking bids. Not all straight across the board, but the single-family home market is trending up.”
In some cases, buyers are willing to pay higher interest rates to get in and are waiting for future interest rates to drop to refinance, she said.
From November 2021 through July 2022, high tier price growth, meaning more expensive homes in affluent areas, outpaced low-tier gains, which are more modest middle class homes, according to CoreLogic.
As soon as interest rates went up and things took a pause, the lower end market hurt and the middle-class market was priced out, Perego said.
However, Julie Schumer-McMahon, senior vice president for housing lender Guaranteed Rate Affinity, said sellers have been using buydowns to help with closing costs or lowering interest rates for potential buyers as an incentive to get their home off the market.
“Permanent buydown means the rate is brought down to a lower interest rate because the seller contributes to closing cost,” said Schumer-McMahon. “Temporary buy-downs mean the seller contributes money to a temporary buydown of the interest rate but then it gradually goes back up.”
Buyers have a little bit more to purchase because home prices have settled a little bit, but also because interest rates are deductible.
“Even though the rates have gone up, buyers may have a greater tax benefit,” Schumer-McMahon said. “A house that you had to compete against last year, you may not have to compete against as much this year,”
Resources such as the California Housing Finance Agency, which allows prospective buyers to enter the market with a minimum down payment, can help potential buyers who have less purchasing power get into the housing market, she said.
“Sometimes you can get credit toward closing costs but need to pass an income requirement and be a first-time home buyer,” Schumer-McMahon said. “There are a lot of products for minimal down payments but check with your local lender for more information.”
Welcome to the discussion.
Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.