After peaking at 7.,08% for a 30yr fixed rate in early November, rates have been trending downward. According to Freddie Mac, at the close of last week, the rate had dropped nearly 1 basis point to 6.13%. As a result, home purchase demand is thawing from the months-long freeze that gripped the housing market. Potential homebuyers remain sensitive to changes in mortgage rates, but ample demand remains, fueled by first-time homebuyers.
For much of 2021 rates remained fairly steady, in the upper 2’s to low 3’s percentage points. In the Fall of 2021, rates started slowly increasing. Then at the start of 2022, rates began a steep climb, eventually peaking at 7.08% by early November. Combined with record increases in home prices throughout the year, many buyers were priced out of the market.
Buyers are keeping watch to see if home prices become more affordable as mortgage interest rates have been trending lower. With the Spring market about to start, many are preparing to restart their search. In Connecticut, compared as a whole, home prices are up 2.8% from 12 months ago. They peaked in July 2022 and have on average, been falling since. Results vary, as some towns saw a greater or lower peaks, but in general, prices rose steadily through the Summer and began declining through the Fall and Winter as interest rates rose.
Now with mortgage rates trending lower and home prices receding from their Summer highs, sales activity may begin to pick up. Lower interest rates make homes more affordable. For a home costing $500,000, the .93% lower interest rate from last Fall’s peak translates to more than $300 savings in monthly payments, and over $110,000 interest saved over the life of a 30 year loan.
