The average interest rate for a 30-year fixed-rate mortgage increased to 6.52% on April 11, up from its lowest point in two months the week prior, according to data from Mortgage News Daily. While the recent fluctuations have contributed to a slow start to the spring homebuying season in Sacramento, other factors have also played a role. A year ago, the Sacramento housing market was booming, but it has since seen some of the largest declines in the US, with the median sale price for homes falling by 13% YoY in March 2023.
Pending home sales have also decreased, down 46.5% YoY. These trends are not unique to Sacramento, as the Mortgage Bankers Association reported that new mortgage purchase applications nationwide fell 4.1% YoY in early April, with the housing market “missing the customary burst in listings and purchase activity that typically mark the season,” according to Mike Fratantoni, the MBA’s SVP and chief economist.
Homebuyers Face Uncertainty as Credit Crunch Looms and Mortgage Rates Fluctuate
Mortgage rates are influenced by a range of factors, including credit score, down payment, debt-to-income ratio, loan type, and term, interest rate type, and the state of the economy and inflation. Although the Federal Reserve does not set mortgage rates, its actions can influence them, and it raised the target federal funds rate by 0.25% in March 2023, with the expectation of one more hike in 2023. Furthermore, economists are predicting a credit crunch is coming, which could make it harder for homebuyers to secure mortgages.
Locking in a mortgage rate fixes the interest rate for a set period of time, typically 30, 45, or 60 days, and it is essential to compare offers from multiple lenders to find the best loan for a particular situation. Although it’s been challenging to predict mortgage rates recently due to their volatility, locking in a rate could protect against a sudden increase. However, if rates decrease, homebuyers could miss out on a lower rate.