Interest rates lower but still high

I am not in favor of putting any kind of a spin on interest rates. Sure they went down a little and we saw an uptick in mortgage applications but the rates make houses less affordable.

People who bought houses when the rates were at rock bottom are not going to be selling anytime soon.

It is especially important right now to buy the right house and not the overpriced house.



Graph showing interest rates
Interest rates


Rates went down a little mortgage applications went up

I think 2023 is going to be an interesting year for the housing market. Interest rates have gone down a little and at the same time

US Mortgage Applications Jump the Most since 2020 Mortgage applications in the US surged 27.9% in the week ended January 13th 2023, the biggest jump since the first week of March 2020, as interest rates dropped to the lowest level since September, data from the Mortgage Bankers Association showed.”

Mortgage rate chart
Mortgage rate survey

The demand for housing remains high. Interest rates will likely go down further but we probably won’t see 3 or 4% again for many years.  Home prices will probably level out a bit but at this point in the Twin Cities, they are still rising.

Mortgage interest rates easing up

Graph of interest rates going down
Mortgage rate survey Freddie Mac

Mortgage interest rates will likely go down a little more but I don’t think we are going to see rates below 5% any time soon.  Home prices in the Twin Cities metro area are not falling but rising much more slowly.  Houses are still selling quickly but the number of new listings is down and so is the number of home sales.

The slightly lower interest rates make houses just a little more affordable. Mortgage interest rates reached a 20-year high last October.

In other news, rents have been going down after going up last spring and summer.

Under water after purchasing a home

Flooding 2019 Mississippi river
Raspberry Island – underwater

It has been in the news lately about how some home buyers who bought houses in 2022 are “underwater” on their mortgages. In this case “underwater” means that borrowers owe more on their house than they could get for it if they sold it.

This scenario isn’t at all unusual. I will venture to say that most people end up owing more on a house than they can get for it if they sold it a few months after they bought it. This is especially true if the downpayment was low.

Home prices are still rising here in Minnesota. Maybe in six months or so those “underwater” homeowners will be above water again. Maybe it will take a year or even two.

The first payments on a thirty-year mortgage are mostly interest. People who bought their houses recently probably have low-interest rates which makes it easier to build equity. If you bought a house in St. Paul during the last two years and have somehow lost money on it you may have paid too much for it.

Being “underwater” doesn’t matter at all unless the homeowner has to sell. My advice has always been the same. Buying a house is a long-term commitment. People who plan on moving in the next few years should rent instead of buying.

If you think you may owe more on your house than what you owe on it and live in the metro area my advice is to keep calm and keep making those payments. If you can not make them due to job loss contact your lender immediately.

Rates went down slightly

When the Federal Reserve raises the prime rates which are not the same thing as mortgage rates. The prime rate is the lowest rate at that money can be borrowed commercially and it does affect interest rates.

Generally speaking small variations in mortgage interest rates don’t have much of an impact on the housing market. Large variations do have an impact. Right now fewer people can afford to buy a home. Home prices are still rising but will eventually flatten out and then decline.

Mortgage rates
Mortgage rate survey