Optimism spread through the mortgage industry at the start of 2023. Signs that disinflation process was working raised hopes Federal reserve may stop rate hikes sooner rather than later. Mortgage rates also fell about 30 basis points in January, reaching their lowest level since September 2022.
But February brought a dose of reality back to the markets. Am 3. February, the Bureau of Labor Statistics The report showed that total nonfarm employment in January rose by 517.000, a higher increase than expected.
And this week Fed Chairman Jerome Powell said there is still "a long way to go" as we are in the "very early stages of disinflation".
"For example, if we continue to get strong labor market reports or higher inflation reports, we may well have to do more and raise rates more than is priced in," Powell said at the Economic Club of Washington. D.C
That was enough to cause mortgage rates to rise again.
The Latest Freddy Mac survey shows the 30-year fixed-rate mortgage at 9. February at 6.12% – up three basis points from previous week. Surveyed are conventional, conforming purchase loans with 20% down and borrowers with very good credit ratings.
But other indexes revealed even higher rates. According to mortgage news daily, the 30-year fixed rate was at 6.42% Thursday afternoon. In the HousingWire Mortgage Rates Center, the Optimal Blue data – which uses actual locked rates with consumers on 35% of all mortgage transactions across the country – showed rates Wednesday of 6.29%.
"Mortgage rates rose slightly this week following a Federal Reserve rate hike and a surprisingly strong jobs report," Sam Khater, chief economist at Freddie Mac, said in a statement. "The 30-year fixed rate continues to hover near 6%, and interested homebuyers are returning to the market just in time for the spring homebuying season."
A Year of Mortgage Rate Volatility
Mortgage industry observers and executives expect 2023 to be a year of tension and volatility until the path to recovery is found. To navigate this challenging environment, numerous companies have announced mergers and acquisitions. Many have also imposed additional rounds of layoffs to reduce costs.
"We've seen the Federal Reserve raise rates seven times by a total of 425 basis points," Michael Nierenberg, chairman and CEO at New York Rith Capitalsaid during a call with analysts Wednesday.
Looking ahead, Nierenberg said 2023 will be "tough" but the Fed is "done" with rate hikes. "I think you're going to see significantly more volatility in the market this year. We will continue to monitor interest rate movements."
According to George Ratiu, manager of economic research at Realtor.com, the tension between expectations and economic data will continue to permeate financial markets for several more months. As a result, mortgage rates are likely to move up and down in a narrow range over the next few weeks.
"In housing markets, current interest rates remain a significant barrier to affordability, especially for first-time homebuyers. At the same time, there are several undercurrents that continue to change market dynamics, Ratiu said.