No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.
Following the extended Memorial Day weekend, we have witnessed a positive rate shift over the past two days, effectively countering the previously escalating trend. Last week rates reached the highest levels seen in 2023. This recent downturn is primarily attributable to the likely resolution of the debt ceiling standoff, which had previously imposed significant pressure on the bond markets. The rate markets can now concentrate on economic fundamentals such as employment and inflation data.
The focus later this week will primarily be on employment, with the release of the ADP Employment Report tomorrow, followed by the monthly BLS Jobs Report on Friday. These reports are expected to influence short-term rate fluctuations significantly. They will likely influence the Federal Reserve’s decision about a potential rate hike in the upcoming mid-June meeting.
Beyond the debt ceiling drama, technical analysis shows that rates can move lower with a positive stochastic crossover and a bottoming-out reversal off of support.
What rates do over the next few months will be heavily influenced by what we see with inflation. We expect future inflation numbers to decline as many of the headwinds we have been facing, such as shelter costs, oil prices, and used car prices, begin to ease. A driving force in the shelter cost calculation is rental prices. Apartment List reported rents up 0.9% yearly, down from 1.7% in April to 2.6% in March. Oil prices which have been surging in prior inflation readings, are down below $70 a barrel from a high of $83 following OPEC’s announced production cuts. Used car prices in April were abnormally high, and we expect a more normalized number for May.
Following Friday’s jobs report, the key focus will shift towards the Consumer Price Index (CPI), due for release on June 13th, a day before the Fed’s decision regarding a potential .25% rate hike. Given the aforementioned factors, we could see a better-than-expected inflation number on the headline and the core rate. This would help cement a reversal in rates and help drive rates lower, as many had predicted earlier in the spring.
Earlier, the prospect of lower rates heading into summer was based on declining inflation, a slowing economy, and the end of the Federal Reserve’s tightening cycle. Over the next few weeks, the upcoming data will clarify whether these predictions will materialize.
With spring buying season in full swing, the competition is real as buyers test the market, and we see things shift from a buyer’s market to a more balanced market. Closing quickly and presenting the strongest offer possible is the difference between success and failure when buying a home.
To get started on your search for the lowest possible rate, start by comparing different lenders and working with a company that is transparent with their mortgage rates and costs online. An experienced Mortgage Advisor or Loan Officer can also help guide you and answer any questions you have about the current market and the best path forward.
**Conforming assumptions – $800k Purchase Price, 25% Down, 800+ Credit
**Jumbo assumptions – $1.5MM Purchase Price, 25% Down, 800+ Credit
Conforming 30-year fixed = Rate 5.875%, 6.106% APR
Conforming 15-year fixed = Rate 5.25, 5.665% APR
Conforming 7/1 ARM = Rate 5.750%, 7.074% APR
Jumbo 30 year fixed = Rate 6.25%, 6.514% APR
Jumbo 15 year fixed = Rate 6.500%, 6.939% APR
Jumbo 7/1 ARM = Rate 6.625%, 7.539% APR
Conforming 30-year fixed = Rate 5.875%, 6.106% APR
Conforming 15-year fixed = Rate 5.25, 5.665% APR
Conforming 7/1 ARM = Rate 5.750%, 7.074% APR
Jumbo 30 year fixed = Rate 6.25%, 6.514% APR
Jumbo 15 year fixed = Rate 6.500%, 6.939% APR
Jumbo 7/1 ARM = Rate 6.625%, 7.539% APR
Conforming 30-year fixed = Rate 5.875%, 6.106% APR
Conforming 15-year fixed = Rate 5.25, 5.665% APR
Conforming 7/1 ARM = Rate 5.750%, 7.074% APR
Jumbo 30 year fixed = Rate 6.25%, 6.514% APR
Jumbo 15 year fixed = Rate 6.500%, 6.939% APR
Jumbo 7/1 ARM = Rate 6.625%, 7.539% APR
Conforming 30-year fixed = Rate 5.875%, 6.106% APR
Conforming 15-year fixed = Rate 5.25, 5.665% APR
Conforming 7/1 ARM = Rate 5.750%, 7.074% APR
Jumbo 30 year fixed = Rate 6.25%, 6.514% APR
Jumbo 15 year fixed = Rate 6.500%, 6.939% APR
Jumbo 7/1 ARM = Rate 6.625%, 7.539% APR
(State-specific rates sourced from Sammamish Mortgage – National Average rates sourced from Zillow)
Without a doubt, the biggest driver of interest rates is inflation. With that in mind, we continue to focus on inflation data and expectations going forward to gauge what we can expect to see interest rates do in the coming months. Current inflation is running well above the Fed’s annual target of 2%, pushing the Fed’s hand to raise short-term rates to slow things down. While current numbers remain elevated, we expect a significant reduction in the inflation readings in the coming months as various factors moderate the pace of inflation.
Consumer Price Index (CPI) April = 0.37% – Annual = 4.9%
Producer Price Index (PPI) April = -0.2% – Annual = 2.3%
Personal Consumption Expenditures (PCE) March = 0.1% – Annual = 4.2%
Overall, it is difficult to predict what will happen with mortgage rates in the near term. With global economic turmoil, banking issues, inflation, and thus far a far more resilient economy than many expected, trying to predict rates from one day to the next to time a rate lock is almost impossible or at least requires luck. However, looking at a longer time horizon, it’s much easier to see that there is an excellent chance we could see rates move lower from current levels providing an opportunity for recent and existing buyers to potentially refinance in the future.
Case Shiller revealed a 0.4% growth in home prices in March following a 0.2% increase in February. Back-to-back home price increases support predictions that home prices have bottomed out. In addition, Year-over-year, prices rose by 0.6%, a decline from the previous report’s 2.0%, due to higher comparable sales during last spring’s housing market peak.
The FHFA released their House Price Index measuring home price appreciation for single-family homes with conforming loan amounts excluding cash buyer and jumbo loans. The report showed prices increasing by 0.6% in March and showing that prices are now back above their previous peak in June of 2022. In addition, the West Coast, which has been lagging behind the national numbers in appreciation since the market correction started, turned positive in March, showing a 0.6% increase.
These reports reflect what we’ve heard from clients and partners as demand from new homebuyers outpaces new inventory thus far during the spring homebuying season. We expect this trend to continue as we head into summer, especially if rates move lower.
Zillow updated their home price forecasts predicting that values will rise by around 4% in 2023. This is similar to many other forecasts but significantly better than the narrative the press is pushing. Moderate home appreciation is healthy for the housing market and another sign that we avoided a crash in home prices after multiple years of unsustainable price appreciation.
Black Knight announced a 0.5% increase in March, following a 0.4% rise in February. CoreLogic’s Home Price Insights showed a 1.6% growth in March and a 3.1% annual increase. This 1.6% uptick is twice the 0.8% increase observed in February. Consequently, CoreLogic adjusted its forecast, predicting a 4.6% price increase over the next year, nearly 1% higher than last month’s projections.
The National Association of Realtors published their existing home sales report, excluding new construction, which indicated a 2.4% decrease in March and a 22% drop compared to the previous year. The median sales price declined by 0.9% year-over-year but increased by 2.2% month-over-month, consistent with other reports suggesting a resurgence in home prices as the spring buying season approaches. Housing inventory remained significantly below standard levels with a 2.6-month supply, two months short of a “normal market,” and 40% of the existing inventory currently under contract.
The National Association of Home Builders (NAHB) announced a five-point increase in their Housing Market Index, reaching 50, which is the highest level since July 2022. The increase was primarily due to the ongoing inventory shortage in the housing market and the lack of existing homes for sale limiting competition for new construction. While builder optimism is increasing, the actual production of new homes is still too low. The housing boom we have seen over the past several years has been in home appreciation, not new home construction. Currently, 1/3 of the housing inventory is new construction, yet the annual rate of homes being built is less than half of the average production since 2000. If you’re wondering why the crash in home prices never materialized as many anticipated, this is a big reason, as there was minimal increased supply when demand dropped.
Housing Starts rose by 2% in April, resulting in a 1.4 million-unit annualized rate, a 22% reduction compared to last year. Single-family starts, a vital aspect of the housing market, experienced modest growth of 1.6% in April, reaching an 846,000-unit pace. Nevertheless, single-family residence (SFR) starts have declined by 28% year-over-year, implying that new supply will remain scarce. Housing permits, which serve as indicators of future housing supply, also decreased in April, dropping by 1.5% to a 1.416 million-unit annualized rate, representing a 21% reduction from the previous year. New home completions fell by over 10% in April, and single-family homes were down 6.5%.
The current data does little to assuage concerns about the limited inventory in the housing market. Existing home values are anticipated to appreciate as demand consistently exceeds supply, particularly for entry-level homes. This trend underscores the necessity for a balanced and sustainable approach to address the persistent supply-demand imbalance in the residential real estate market.
When the Federal Reserve raises interest rates, it affects various aspects of the economy, including the housing market, savings, and investment.
For potential homebuyers, a Fed rate hike typically leads to an increase in mortgage rates in the early stages of a tightening cycle; however, if the market thinks the Fed rate increases will hurt the economy and cause inflation to decrease, mortgage rates can actually improve when the Fed raises the Fed Funds Rate. It’s important to note that the Fed does not control mortgage rates. Fed rate increases do directly impact credit card rates, car loans, and commercial loans, which are shorter in duration than a typical 30-year fixed mortgage.
For savers, a Fed rate hike may lead to higher returns on savings accounts and certificates of deposit (CDs). In addition, banks and other financial institutions may increase the interest rates they pay to savers to remain competitive, which can benefit savers looking to earn more on their savings.
A Fed rate hike may impact the stock and bond markets for investors. Typically, when interest rates rise, the value of stocks and bonds can fall as investors may shift their money to fixed-income investments with higher returns. However, the impact of a rate hike on the markets can be complex and depend on various factors such as the overall state of the economy, inflation expectations, and global events.
| FOMC Meeting Date | Rate Change (bps) | Federal Funds Rate |
| May 03, 2023 | +25 | 5.00% to 5.25% |
| March 22, 2023 | +25 | 4.75% to 5.0% |
| February 2, 2023 | +25 | 4.50% to 4.75% |
| December 14, 2022 | +50 | 5.0% to 5.25% |
| November 2, 2022 | +75 | 4.5% to 4.75% |
| October 12, 2022 | +75 | 3.75% to 4.00% |
| Sept 21, 2022 | +75 | 3.00% to 3.25% |
| July 27, 2022 | +75 | 2.25% to 2.5% |
| June 16, 2022 | +75 | 1.5% to 1.75% |
| May 5, 2022 | +50 | 0.75% to 1.00% |
| March 17, 2022 | +25 | 0.25% to 0.50% |
Loan limits have increased for 2023 due to rising home prices throughout 2022. Each county in every state has its loan limit. That said, most counties’ new conforming loan limit is $726,200 for 2023. FHA loan limits are $472,030 for most counties in 2023, though they can be much higher for more expensive counties.
Visit our 2023 conforming loan limit pages for Washington State, Oregon, Idaho, and Colorado.
For FHA loan limits for 2023, visit our pages for Washington State, Idaho, Colorado, and Oregon.
Check out our mortgage loan limit tool for conventional, FHA, and VA loans.
Do you have questions about rates this week and home loans? Or are you ready to apply for a mortgage to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Our programs include the Diamond Homebuyer Program, Cash Buyer Program, and Bridge Loans. Contact us today with any questions you have about mortgages.
Whether you’re buying a home or ready to refinance, our professionals can help.
{hours_open} - {hours_closed} Pacific
No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.