After peaking at 7.08% just two months ago, the interest rate for the 30-year mortgage averaged 6.13% this week, and while homebuying activity remains low, mortgage purchase applications inched 3% higher last week, the National Association of Realtors reports. After months of steady rate hikes, the Federal Reserve plans to vote for a smaller increase at its meeting next week as inflation shows signs of easing.
Though demand is only rising at a tentative pace, economists say another rate reduction could spark an increase in home sales and redirect the housing market from its path toward a 2023 recession.
“Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market,” says Joel Kan, an MBA economist. “Many have been waiting for affordability challenges to subside.”
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