Spring is here, signaling the beginning of the new home-buying season. According to Ramsey Solutions, the number of homes for sale nationally in 2022 rose an additional 120,000 from April to May, the fastest growth rate all year. And this year should be no different. The interest rate will be a significant factor in determining the increase in sales. Will we see a drop from the current rate hovering around 7%?
The Federal Reserve implemented a 0.25% interest rate hike, the 10th in just over a year on May 3, but indicated that rate increases may no longer be needed to hold the 2% target for inflation. This should bode well for a gradual mortgage rate drop over the remainder of the year.
A recent U.S. News and World Report article says that most forecasters predict the average 30-year fixed mortgage rate will be at or slightly above 6% during the spring months of April, May, and June. Here’s how the report breaks down the second-quarter predictions from four mortgage entities:
- Mortgage Bankers Association: 6.1%
- National Association of Realtors: Low 6% Range
- Realtor.com: 6% to 7%
- Wells Fargo: 5.75% to 6.2%
According to Forbes, competition for homes this spring will differ from previous years. Prices have dropped slightly in 2023, and houses will stay on the market longer than last year, giving buyers a little room to negotiate. But how the rates shake out will affect both the supply and demand. If the rates are at or below 6%, this will bring more buyers out and, in turn, make the market more appealing to sellers, increasing the available inventory.
Inflation data and consumer confidence reports can influence whether the Federal Reserve will raise, lower, or pause interest rates. There is no sure indicator of how rates will fluctuate over the next few months. The best advice to buyers is to watch rates and be prepared. Many lenders offer programs allowing you to start the underwriting process early so you can close faster and be ahead of the competition. If you have any questions or want to talk to one of NASB’s lending experts, call us at 855-465-0752, or click here for home-buying help.