Inflation and Inventories
Recent inflation data has seen a bit of cooling off in the numbers which in turn has helped borrowing costs to decline. And with the spring buying season underway, lower mortgage rates can be an unexpected positive boost for the season.
The Mortgage Bankers Association (MBA) reported that mortgage application volumes rose each week in March as the benchmark 30-year fixed rate fell a little over half a point from the beginning of the month, now in the lower 6% range. Also, the MBA said that mortgage payments increased in February but given ongoing economic uncertainty and the likelihood of a recession in 2023, it expects mortgage rates to decline as this year progresses, which will help affordability.
The Federal Reserve recently reported that it sees economic growth or the Gross Domestic Product at an anemic 0.4% for all of 2023. If that is the case and the economy begins to slow, it could be another plus for lower borrowing costs.
There is an ongoing concern … inventories. Let’s put it into perspective. Let’s go back six years. In February 2017, the St. Louis Federal Reserve said there were 1.15 million active listings in the U.S. In February 2023 there were 562,565. But remember, from mid-2020 to early 2022, buyers were out in droves scooping up houses. There were bidding wars across the nation as the pandemic sent Americans away from the big cities.
Bottom line: As price gains fall to more historic levels, demand easing from the pandemic-induced frenzy buying, and rates slowly declining, now is as good a time as ever for potential buyers to achieve homeownership.