Dramatic changes in the housing market typically occur over months, if not years. Not on Friday, January 6, 2023.
The day began with the 30-year mortgage rate at 6.50%, having hovered for the preceding 5 days between 6.41% and 6.54%. Eight hours later, the rate had dropped 30 basis points to 6.20%, tracking the 10-year U.S. Treasure. The 10-year Note began the day at 3.72% and closed at 3.57%.
Combining the data from the two, not only did mortgage rates fall, but the spread between the 30-year mortgage rate and the 10-year Treasury compressed by 15 basis points. Our readers know that the spread has been abnormally high for months.
A 30 basis-point decline in the mortgage rate translates to a $70 reduction in the mortgage payment on a $360,000 mortgage (a $400,000 house purchased with 10% downpayment).
Oh, and why did rates fall so precipitously? Some pundits cite the December jobs report, which showed wage growth slowing more than expected. These folks believe that the Federal Reserve will be pleased by the 0.3% month-to-month hourly earnings increase ($0.09), translating to an annual 3.6% rate not seasonally adjusted. For all of 2022, the wage increase was 4.6%, so December brought a significant reduction in wage growth. The real answer likely is more nuanced.
