After faltering last week, mortgage interest rates resumed the upward path they’ve been on since late September. The week ending Nov. 21, the average rate on the 30-year fixed-rate mortgage climbed nine basis points to 6.88%, according to rates provided to NerdWallet by Zillow. A basis point is one-one hundredth of a percentage point.
Mortgage rates making even the smallest stumble brings more buyers and refinancers into the market. When there’s an actual rate drop, the market can quickly heat up — a phenomenon perfectly illustrated by October’s existing home sales figures, which the National Association of Realtors released this morning.
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A hot October
Usually a slow month for the housing market, this October saw sales of existing homes (everything but new construction) rise 3.4% month over month, according to the NAR. The bigger news was that sales increased 2.9% year over year, the first year-over-year increase since July 2021.
Why were so many homes bought during spooky season? Well, it’s important to remember that home sales aren’t fast. Setting aside time spent on the home search, there’s a considerable lag between when a buyer’s offer is accepted and when the sale actually goes through. (Unless you’re a cash buyer, but we’ll stick to financed buyers here.)
In October, home sales took a median 30 days to close, per the NAR Realtors Confidence Index. That means buyers who were getting the keys to their new homes in October were likely making offers, applying for mortgages and, most significantly for our purposes, locking their interest rates, in September. That month, the average interest rate for a 30-year, fixed rate loan was just 6.07%. Rates had topped 7% as recently as May, so it’s unsurprising that buyers would see opportunity.
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A cool end to the year
Unfortunately, it looks like September may have been the low point for mortgage interest rates this year. Even as the Federal Reserve has transitioned into a rate-cutting phase, mortgage rates have stubbornly risen. Any good news has been tepid: At least rates aren’t spiking anymore.
Forecasters appear to be recalibrating their expectations, which had been for rates dropping to around 6% at year end and falling into the high fives next year. For example, this week Fannie Mae’s Economic and Strategic Research Group adjusted its forecast upward. If you’re trying to imagine how much rates might fall this winter, picture a dusting of snow, not a blizzard.
