The Federal Reserve has dealt a blow to homebuyers by announcing a 0.25% increase in the federal funds rate, a crucial rate for overnight bank lending. Although the Fed rate does not directly affect mortgage rates, they are influenced by similar market factors. Lenders consider inflation, job growth, and the overall economic outlook when setting rates. Therefore, an increase in the Fed rate generally leads to higher mortgage rates. However, it is important to note that availability and affordability may still pose challenges for those looking to buy a home.
In the week ending July 21st, mortgage application volume decreased by 1.8%, according to the Mortgage Bankers Association. This indicates that factors such as low inventory levels and higher mortgage interest rates continue to squeeze homebuyers. The first quarter of the year saw the slowest growth in single-family housing starts since 2019. Additionally, many existing homeowners are holding onto their properties due to low mortgage rates, which further reduces the number of homes available for sale. On the flip side, a strong job market has resulted in fewer forced sales that typically occur during times of high unemployment. These factors should be closely monitored, especially during the peak moving season that runs from April to September, which accounts for the majority of all moves.
It may be beneficial to consider moving during the “offseason” if competition is making it difficult to find a home in your desired neighborhood or school district. The months of June, July, and August are particularly popular for relocations due to better weather and the desire to settle in before the start of the new school year. However, moving outside of these peak months could provide more flexibility and options.
While inflation has been slowing down, mortgage rates are still on the rise. This presents a mixed situation for potential homebuyers. The average interest rate for 30-year fixed-rate mortgages has increased by 0.46 basis points to 7.23%. While inflation has contributed to the rise in rates, it is important to note that buying a home goes beyond market factors. It is a significant and emotional purchase that allows individuals to create their own unique space, regardless of the external circumstances.