Home re-sale jumped up 5.1% in sales for the month of December 2023. This is an impressive increase from last month. Much like the broader housing market, this jump is a sign of a new activity starting to take hold after years of darkness. The 30-year fixed mortgage rate had fallen to an average of 6.06% for the week ending January 15. That represents a drop of 1.39% from 7.04% this time last year.
All of this is happening as mortgage rates continue to drop. Currently, there are more homeowners with rates above 6% than those benefiting from ultra-low rates under 3%. This is an encouraging sign of a deepening pool of homeowners who could help drive a market reawakening if sufficiently spurred. Susan Wachter, a professor of real estate at the Wharton School of the University of Pennsylvania, noted that the observed purchases could already be applying modest downward pressure on mortgage rates.
In December, the median sales price of existing homes was $405,400. This is an extraordinary departure that has lasted for 30 months in a row measured on a year-over-year basis. This trend reflects the continued strength in the market, with healthy demand still outpacing rapidly increasing prices. A buyer who buys a $450,000 house with a 20% down payment makes an estimated monthly principal and interest payment of about $2,405. NOTE: This calculation does presume a lower interest rate. At today’s average interest rate of 6.06%, your monthly payments would fall to around $2,172. This reduction will save you approximately $230 per month—over $84,000 over the term of a 30-year loan.
With the recent mortgage rate declines, former President Donald Trump has been motivated to take action. He’s now calling for the federal government to buy $200 billion more in mortgage bonds to bring borrowing costs down further.
“This will drive Mortgage Rates DOWN, monthly payments DOWN, and make the cost of owning a home more affordable.” – Donald Trump
The housing market is entering its fourth straight month of sales increases, the longest stretch of gains since the middle of 2020. According to Sam Khater, chief economist at Freddie Mac, these increasing trends are the underlying theme in today’s housing market. He added that the effects are starting to come into focus. Specifically, he pointed to the steep increase in weekly purchase applications and refinance activity. This new trend is great news for homebuyers and borrowers who want to refinance their current mortgages.
Like Daryl Fairweather, chief economist at Redfin, noted, a more vibrant housing market would be significant. Though on its own it wouldn’t fully address the broader affordability crisis, it provides many of its own significant economic benefits. He pointed out how folks are stuck in their homes. Due in part to the effects of historically low mortgage interest rates, these homes no longer work for them.
“People who have felt locked in their homes may be turning down job opportunities, they may be delaying getting married, they may be delaying having a baby, all because they feel trapped in a home that doesn’t meet their needs.” – Daryl Fairweather