If you were house hunting about a month ago, you might’ve noticed that the average 30-year mortgage rate was hovering around a hefty 7%.
Buyers Have Been Waiting
No wonder many potential buyers decided to hold off! According to AEI.org, new purchase loan originations were down a whopping 36% from 2019.
Now, Mortgage Rates are Falling
But, if you fast forward to today, you’ll see that mortgage rates have taken a steep nosedive to below 6.5%, and they could keep dropping. How did this happen? Well, rates plummeted after the Silicon Valley Bank failure, and more recent economic reports suggested that inflation is decreasing, and the economy is slowing down.
The Excess Demand for Bonds
So, what’s the deal with bonds and rates? Essentially, when there’s excess demand for bonds, rates go down. Investors tend to purchase more bonds when the economy is weak and inflation isn’t as much of a concern. As news of a weakening economy keeps rolling in, rates are likely to keep falling.
Rates Could Dip Below 6%
We’ve got some big economic reports coming out over the next few days, including the jobs report (tomorrow) and the Consumer Price Index (next week). If these reports confirm what we’ve seen this week, we could see rates dip below 6%.