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USA Today
No other phrase has defined the 2023 housing market as much as the "mortgage rate lock in effect" – a phenomenon that brought the industry to a standstill, putting downward pressure on everything from inventory levels to home sales. The pandemic-era sub-5% mortgage interest rates that 85% of current mortgage holders are locked in to kept current homeowners from selling their home and buying another at elevated interest rates, which peaked at 7.79% the week ending Oct. 26, according to Freddie Mac. But will things change this year? There are signs that market conditions will be improving. Mortgage rates dropped steadily over the past seven weeks, averaging 6.61 % for a 30-year fixed mortgage, the week ending Dec. 28. The lower mortgage rates provided a boost to existing-home sales which grew in November, up 0.8% from October and breaking a streak of five consecutive monthly declines, according to the National Association of Realtors®. "A marked turn can be expected as mortgage rates have plunged in recent weeks," says NAR Chief Economist Lawrence Yun. The median existing-home price for all housing types in November was $387,600, an increase of 4% from November 2022 ($372,700). All four U.S. regions posted price increases. "Home prices keep marching higher," Yun says. "Only a dramatic rise in supply will dampen price appreciation."