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No debate about mortgage rates

In the housing market, interest rates are king. And queen. And prince and princess. From a financial standpoint, mortgage rates rank as the top variable that impacts a home buyer’s decision.

Compared to just three years ago, those figures have remained high. That has stoked broad concern among analysts that buyers would rather wait out interest rate hikes and re-enter the market; here, the magic number hovers in the 3% range.

But that could make for a long wait. Many economists are predicting at least one more Fed rate hike in its bid to tame inflation this year — and there’s little doubt that Fed chair Jerome Powell is frustrated that he can’t cool the job or housing markets. (Too bad, Jerome: Every job seeking, house hunting/selling American feels the exact opposite way.)

Still, go figure — literally. The average rate on a 30-year fixed rate mortgage has recently dropped slightly to 6.28%, according to Freddie Mac data. True, that’s nearly double where it stood in January 2022, but experts are still cautiously optimistic buyer interest will pick up as the spring season rolls on and rates trend downwards.

Read more: Here's how much the average American 60-year-old holds in retirement savings — how does your nest egg compare?

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Housing tours de force

House shopping involves more than checking in on Zillow, even if they’ve cornered the market on fire-gutted mansions in the South.

As the ashes of a scorching-hot real estate market start to settle, house hunters are eagerly looking to snatch a deal. With mortgage rates and home prices on the decline, purchase applications increased for the fourth week in a row, according to Redfin’s Homebuyer Demand Index.

And the number of buyers requesting to tour homes, make an offer on one or to start a home search with a Redfin agent jumped to its highest level since May 2022.

In other markets, old school negotiation is making a comeback. Another Redfin report reveals that nearly half of sellers are making concessions like covering the costs of repairs or closing costs to secure a sale.

Redfin’s research suggests buyers may have adapted to mortgage rates in the 6% range after 7%-plus rates scared them off in October 2022.

Meanwhile, sellers who in 2021 could take advantage of low inventory and comparatively lower rates — the stuff of universal bidding wars — now face buyers who will choose wisely based on the moderating but still elevated rates. As Redfin and others have reported, sellers have been more willing to make concessions.

Some closure on foreclosure

Foreclosure starts reflect another facet of the market’s strength.

Starts were down 34% compared to 2019, according to ATTOM Data’s Year-End 2022 U.S. Foreclosure Market report. Year-over-year starts were up in December 2022 but down between November and December. That suggests government lending rules and an overall strong economy had contained foreclosures.

Data compiled by ATTOM shows more than 90% of borrowers in foreclosure have positive equity, “which they appear to be leveraging in order to avoid a foreclosure by refinancing their mortgage or selling the property at a profit,” the group said. “It seems likely that this is a trend that will continue in 2023.”

So if you’re looking to make a move — buying, selling or maneuvering past foreclosure risk — remember this stock market corollary: market timing. Getting in and out of a stock at an ideal time appears easy to do, but it’s virtually impossible. No one could have foreseen, even a year ago, how much mortgage rates would jump. Will they take off again tomorrow? We know the Fed is eyeing more rate hikes.

The bottom line is that when an opportunity pops up, especially if it means a superior school district and/or a better quality of life, you may want to jump on it. No need to pursue a mansion scarred by fire — just take stock of your finances and your burning desire.

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About the Author

Chris Clark

Chris Clark

Freelance Contributor

Chris Clark is freelance contributor with MoneyWise, based in Kansas City, Mo. He has written for numerous publications and spent 18 years as a reporter and editor with The Associated Press.

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The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.