The Fed has given some hope to homebuyers by declining to raise the federal funds rate, a key overnight bank lending rate. Although the Fed rate and mortgage rates move independently, the same market factors drive the rate increases and cuts.
Inflation, job growth and the overall economic outlook impacts lenders and how they set rates. A steady Fed rate should translate to fewer increases in mortgage rates. But availability and affordability may still be obstacles when shopping for a home. In its statement, the Fed acknowledged that "Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks."
Factors squeezing buyers
Mortgage application volume decreased by 2.1% from one week earlier for the week ending November 1th, according to the Mortgage Bankers Association. This is the third consecutive week that mortgage applications decreased.
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Homebuyers continue to be challenged by low inventory levels and higher mortgage interest rates. Single-family housing starts in September 2023 were 4.4 percent below the revised August rate and 7.2 percent below the September 2022 rate. With many existing homeowners locked in low mortgage rates, inventory will remain a challenge as fewer people list homes. A strong job market has led to fewer forced sales that usually accompany unemployment. These are factors you should watch during peak moving season.
Peak moving season runs from April through September, accounting for almost 80% of all moves. Better weather and trying to get kids settled before the new school year begins have made June, July and August the most popular months to resettle. Moving “offseason” may be the way to go if the competition is keeping you out of your desired neighborhood or school district.
For 2023, the best week to buy a house was in October. The Realtor.com team projected that the week of October 1-7 represented homebuyers' best combo of market conditions for the remainder of 2023.
Use our tool, in partnership with Bankrate, to compare mortgage rates from a number of lenders.
Inflation is receding, but rates are still rising
Slowing inflation and a small increase in mortgage rates is a good news, bad news situation. The average interest rate for 30-year fixed-rate mortgages increased by .16 basis points to 7.79% compared to 7.63% last week. Inflation slowed but housing continued to be a major contributor.
Buying a home can be both terrifying and exhilarating. It’s probably the biggest purchase you will make in your lifetime. Market factors will largely determine what house you can buy, but not what kind of home you create.
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