After months of relentless interest rate hikes and dwindling volumes, the U.S. mortgage market is finally glimpsing light at the end of a long tunnel.
Recent data from the Mortgage Bankers Association (MBA) indicates a significant drop in mortgage rates, hinting at improved affordability and a potential revival in the housing market.
Key Developments In The US Mortgage Market
1. Drop In 30-Year Fixed Mortgage Rates:
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) declined to 6.83% in the week ending Dec. 15, 2023.
- This rate marks a sixth-straight week of declines and a new low since June 2023.
- Mike Fratantoni, MBA's SVP chief economist, attributes this decrease to positive news about inflation reduction and the Federal Open Market Committee's (FOMC) pivot towards rate cuts.
- In its last meeting of the year, the Fed signaled that the median preferred interest-rate path suggests cuts totaling 75 basis points in 2024 and an additional reduction of 100 basis points in 2025.
- U.S. Treasury bond yields have significantly fallen, with the 10-year Treasury yield dropping from 5% in October to 3.90% as of Dec. 20, pushing long-term mortgage rates lower.
- While a 1.5% slowdown in the pace of new mortgage applications occurred last week, a year-over-year comparison shows a more favorable trend. The number of mortgage applications for purchasing a home, or refinancing one, are up by 18% compared to the same period last year.
Sector Performance
Lately, stocks in the real estate sector have experienced an impressive surge, with the Real Estate Select Sector SPDR Fund
Standout performers in this sector include Arbor Realty Trust Inc.