What’s Really Happening with Mortgage Rates?
Are you feeling a bit unsure about what’s really happening with mortgage rates? That might be because you’ve heard someone say they’re coming down. But then you read somewhere else that they’re up again. And that may leave you scratching your head and wondering what’s true. The simplest answer is: that what you read or hear will vary based on the time frame they’re looking at. Here’s some information that can help clear up the confusion. Mortgage Rates Are Volatile by Nature Mortgage rates don’t move in a straight line. There are too many factors at play for that to happen. Instead, rates bounce around because they’re impacted by things like economic conditions, decisions from the Federal Reserve, and so much more. That means they might be up one day and down the next depending on what’s going on in the economy and the world as a whole. Take a look at the graph below. It uses data from Mortgage News Daily to show the ebbs and flows in the 30-year fixed mortgage rate since last October: If you look at the graph, you’ll see a lot of peaks and valleys – some bigger than others. And when you use data like this to explain what’s happening, the story can be different based on which two points in the graph you’re comparing. For example, if you’re only looking at the beginning of this month through now, you may think mortgage rates are on the way back up. But, if you look at the latest data point and compare it to the peak in October, rates have trended down. So, what’s the right way to look at it? The Big Picture Mortgage rates are always going to bounce around. It’s just how they work. So, you shouldn’t focus too much on the small, daily changes. Instead, to really understand the overall trend, zoom out and look at the big picture. When you look at the highest point (October) compared to where rates are now, you can see they’ve come down compared to last year. And if you’re looking to buy a home, this is big news. Don’t let the little blips distract you. The experts agree, overall, that the larger downward trend could continue this year. Bottom Line Connect with a professional if you have any questions about what you’re reading or hearing about the Oklahoma housing market.
2 of the Factors That Impact Mortgage Rates
If you’re looking to buy a home in Oklahoma, you’ve probably been paying close attention to mortgage rates. Over the last couple of years, they hit record lows, rose dramatically, and are now dropping back down a bit. Ever wonder why? The answer is complicated because there’s a lot that can influence mortgage rates. Here are just a few of the most impactful factors at play. Inflation and the Federal Reserve The Federal Reserve (Fed) doesn’t directly determine mortgage rates. But the Fed does move the Federal Funds Rate up or down in response to what’s happening with inflation, the economy, employment rates, and more. As that happens, mortgage rates tend to respond. Business Insider explains: “The Federal Reserve slows inflation by raising the federal funds rate, which can indirectly impact mortgages. High inflation and investor expectations of more Fed rate hikes can push mortgage rates up. If investors believe the Fed may cut rates and inflation is decelerating, mortgage rates will typically trend down.” Over the last couple of years, the Fed raised the Federal Fund Rate to try to fight inflation and, as that happened, mortgage rates jumped up, too. Fortunately, the expert outlook for inflation and mortgage rates is that both should become more favorable over the course of the year. As Danielle Hale, Chief Economist at Realtor.com, says: “[M]ortgage rates will continue to ease in 2024 as inflation improves . . .” There’s even talk the Fed may actually cut the Fed Funds Rate this year because inflation is cooling, even though it’s not yet back to their ideal target. The 10-Year Treasury Yield Additionally, mortgage companies look at the 10-Year Treasury Yield to decide how much interest to charge on home loans. If the yield goes up, mortgage rates usually go up, too. The opposite is also true. According to Investopedia: “One frequently used government bond benchmark to which mortgage lenders often peg their interest rates is the 10-year Treasury bond yield.” Historically, the spread between the 10-Year Treasury Yield and the 30-year fixed mortgage rate has been fairly consistent, but that’s not the case recently. That means, there’s room for mortgage rates to come down. So, keeping an eye on which way the treasury yield is trending can give experts an idea of where mortgage rates may head next. Bottom Line With the Fed meeting later this week, experts in the industry will be keeping a close watch to see what they decide and what impact it’ll have on the economy. To navigate any mortgage rate changes and their impact on your moving plans, it’s best to have a team of professionals on your side.
Are More Homeowners Selling as Mortgage Rates Come Down?
If you’re looking to buy a home in Oklahoma, the recent downward trend in mortgage rates is good news because it helps with affordability. But there’s another way this benefits you – it may inspire more Oklahoma homeowners to put their houses up for sale. The Mortgage Rate Lock-In Effect Over the past year, one factor that’s really limited the options for your move is how few homes were on the Oklahoma market. That’s because many homeowners chose to delay their plans to sell once mortgage rates went up. An article from Freddie Mac explains: “The lack of housing supply was partly driven by the rate lock-in effect. . . . With higher rates, the incentive for existing homeowners to list their property and move to a new house has greatly diminished, leaving them rate locked.” These homeowners decided to stay put and keep their current lower mortgage rate, rather than move and take on a higher one on their next home. Early Signs Show Those Oklahoma Homeowners Are Ready To Move Again According to the latest data from Realtor.com, there were more homeowners putting their houses up for sale, known in the industry as new listings, in December 2023 compared to December 2022 (see graph below): Here's why this is so significant. Typically, activity in the Oklahoma housing market cools down in the later months of the year as some sellers choose to delay their moves until January rolls around. This is the first time since 2020 that we’re seen an uptick in new listings this time of year. This could be a signal that the rate lock-in effect is easing a bit in response to lower rates. What This Means for You While there isn’t going to suddenly be an influx of options for your home search, it does mean more sellers may be deciding to list. According to a recent article from the Joint Center for Housing Studies (JCHS): “A reduction in interest rates could alleviate the lock-in effect and help lift homeowner mobility. Indeed, interest rates have recently declined, falling by a full percentage point from October to November 2023 . . . Further decreases would reduce the barrier to moving and give homeowners looking to sell a newfound sense of urgency . . .” And that means you may see more homes come onto the market to give you more fresh options to choose from. Bottom Line As mortgage rates come down, more sellers may re-enter the Oklahoma market – that gives you an opportunity to find the home you’re looking for. Connect with a real estate agent so you’ve got a local expert on your side who’ll help you stay on top of the latest listings in our area.
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