Real Estate Rundown May 2023
May 01, 2023
Experts Predict Mortgage Rates May Drop Below 6% in Coming Months, But What Will be the Tipping Point for Home Buyers?
Mortgage rates are still fluctuating, but may move closer to a sweet spot for buyers in the coming months. After falling for 5 consecutive weeks, mortgage rates have increased to 6.39%. This could cause a temporary setback for potential buyers and increase uncertainty throughout the market. Nadia Evangelou, Senior Economist and director of real estate research for the National Association of Realtors (NAR) notes that rates could be headed below 6% in the coming months as inflation continues to cool.
Calmer Inflation and Lower Mortgage Rates: A Positive Outlook for Homebuyers?
While the economy is still grappling with high inflation, the housing sector is showing signs of cooling off. The yearly rate of inflation has decreased to 5% from 6% and reached the lowest level since May 2021. Data indicates a slowdown in housing inflation which will ultimately benefit home buyers. According to Lawrence Yun, chief economist at the NAR, calmer inflation will lead to lower mortgage rates. The ideal inflation of 2% may be a year away, but the trends are moving in the right direction. Yun also agrees that it appears “very likely” that mortgage rates will drop below 6% towards the end of the year, inching closer to the 5.5% tipping point.
Long Distant Moves On the Rise
Another interesting trend to keep an eye on is the movement of cross-country movers. According to user search data at Redfin, 14% fewer homebuyers researched moving within their metro area compared to a year prior in February, compared to just a 4% drop for cross-country movers. Elevated mortgage rates and the home affordability crisis have pushed homebuyers to relocate to more affordable areas. A record high, 25% of house hunters nationwide were interested in relocating to a new metro earlier this year. That is a 22.9% increase from a year ago, and about 18% higher than before the pandemic. Florida and other Sun Belt Destinations are the most popular for relocating buyers, due to their relatively cheap housing and warm climate.
In summary, the real estate market is still seeing fluctuations in mortgage rates. However, experts believe that rates could drop below 6% in the coming months which could hit a sweet spot where buyers are encouraged to enter the market. The recent ease in inflation rates may lead to lower mortgage rates in the future as well. Another trend to keep an eye on is the movement of long-distance relocations. Spring is traditionally a busy time for the real estate industry, as buyers and sellers are more motivated to jump back into the market.
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