Mortgage Rates Just Went Up—but Here’s Why Next Week Offers Homebuyers Hope

After two weeks of declines, mortgage rates rose again this week, averaging 7.18% for a 30-year fixed-rate loan in the week ending Sept. 14, according to Freddie Mac.

As for where those rates might head next, that will hinge heavily on what happens on Tuesday and Wednesday, when the Federal Reserve is slated to meet about whether or not to hike benchmark rates in its ongoing fight against inflation.

Although worries are swirling over a U.S. Department of Labor report released on Thursday announcing that the producer price index increased by 0.7% in August—higher than July’s 0.4%—some market experts still predict that the Fed won’t raise rates next week.

“As both core inflation and employment have shown signs of cooling, markets expect the Fed to hold rates steady in next week’s meeting as the committee aims to ease the economy into health without overshooting,” says Hannah Jones, an economic analyst at Realtor.com®, in her analysis.

If the Fed leaves rates alone next week, this could spell good news for housing.

“Should incoming data continue to fall in line with market expectations, the housing market can look forward to stability, allowing buyers and sellers to plan for the future more effectively,” Jones adds.

And so as the fall homebuying season unfolds, we’ll explain what the most recent real estate statistics mean for both homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”

Why home affordability will remain a challenge

In addition to optimistic predictions about the Fed’s next move, autumn tends to be an advantageous season for homebuyers.

“Though today’s housing market is decidedly challenging, the fall typically ushers in more favorable buying conditions relative to the rest of the year,” says Jones.

So far at least, though, these buyer-friendly conditions seem slow to unfold, particularly on the affordability front.

In August, home prices hovered at a median of $435,000. That’s only 0.7% below what they were last August, which means prices seem to be holding more or less steady annually.

“As the summer begins its transition to fall, prices have settled below the year’s peak but continue to hover around last year’s level,” says Jones.

And for the most recent week ending Sept. 9, median list prices grew by 0.6% compared with last year. The reason for these inflated prices? There just aren’t enough homes for sale.

Where are all the houses?

Active inventory officially hit a three-month slump for the week ending Sept. 9. Buyers looking for fresh listings were met with 7.1% fewer options compared with a year ago. The same is true for overall inventory of both new and old listings, which were down by 5.1%.

High mortgage rates are yet again to blame for this bleak lack of inventory, as sellers feel “locked in” to their current lower-rate mortgages—and their homes by extension.

One workaround desperate buyers have been exploring is new-construction homes. In fact, a growing number of builders have been willing to offer concessions such as lower interest rates than buyers might get on the open market.

The best week to buy is coming

But buyers take note: Those few sellers who are willing to list their homes are facing a historically slow time in the market. And this cracks open a significant opportunity for buyers who are paying attention.

“As the summer’s busy market slows, buyers may see less competition and relatively more homes than in the last few months,” explains Jones. “Active inventory continues to lag last year’s level, but is improving.”

Indeed, the Realtor.com economic team has identified the very best week to buy a home in 2023: Oct. 1–7. Historical data suggests buyers can save more than $15,000 on median home prices this week as they pore through up to 18.9% of new listings compared with the beginning of the year.

Homebuyers who do find a great home at a pocket-friendly price aren’t shy about making offers, either. While the average home was sold in the same amount of time for the week ending Sept. 9 as it did last year, the pace is likely to pick up.

“As the market continues to lap the 2022 housing slowdown period, it’s very likely that homes could sell more quickly compared to a year ago in the coming weeks despite a lower level of demand,” says Jones.

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