Freddie Mac latest Primary Mortgage Market Survey (PMMS), a measure of conventional, conforming, fully amortizing home purchase loans for borrowers, found that the 30-year fixed-rate mortgage (FRM) fell 0.07 points the week ending December 23, to 3.05% from 3.12%. A year ago at this time, the 30-year FRM averaged just 2.66%.
“The market volatility resulting from the COVID-19 Omicron variant is causing mortgage rates to decrease,” said Sam Khater, Freddie Mac’s Chief Economist. “As the year comes to a close, the housing market is proceeding steadily. However, rates are expected to increase in 2022 which will impact homebuyer demand, as well as refinance activity.”
In terms of refi activity, the Mortgage Bankers Association (MBA) reported just yesterday that while overall mortgage application volume is down, refi activity is up, increasing to 65.2% of total applications from 63.3% the previous week.
However, as George Ratiu, Realtor.com's Manager of Economic Research, predicts, the days of mortgage rates nearing the 3% mark will be short-lived, as recent Fed actions in regards to tapering of their bond-buying program will drive rates upward.
“The combination of rising inflation and the Federal Reserve’s accelerated tapering of mortgage-backed securities purchases is expected to push interest rates higher in 2022, trimming many buyers’ budgets,” said Ratiu. “Realtor.com’s weekly data show prices picking up speed in December as new listings slow, a likely result of many homeowners postponing sale plans until after the holidays. With prices 9.6% higher than a year ago, today’s buyer of a median priced home is paying about $160 more on their monthly mortgage, which adds close to $2,000 to their yearly housing costs.”
The National Association of Realtors (NAR) reports that, in the month of November, existing-home sales rose 1.9% month-over-month, to a seasonally adjusted annual rate of 6.46 million, marking three consecutive months of increases.
In addition to the rise in sales, a squeeze in the market is being felt by many as the U.S. Department of Housing & Urban Development (HUD) and the Census Bureau reported the median sales price of new houses sold in November 2021 was $416,900 nationwide, with the average sales price nearly $65,000 higher at $481,700. Further compounding matters, following the Commerce Department’s announcement that it will double the import duties on Canadian softwood in 2022, the cost of lumber jumped from $573 at the start of November, to $825 per thousand board feet by the end of the month, and continued to $1,100s per thousand board feet in December.
“As we enter the holiday season, and many families look forward to celebrations and a slight respite from another challenging year, real estate markets remain unseasonably lively,” noted Ratiu. “Buyers continue to close contracts for both new and existing homes, hurrying to lock in low mortgage rates before they rise.”
Freddie Mac also reported this week that the 15-year FRM averaged 2.30% with an average 0.7 point, down from last week when it averaged 2.34%, and the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.37% with an average 0.4 point, down from last week when it averaged 2.45%. A year ago at this time, the five-year ARM averaged 2.79%.