The Daily Money: Locked-in mortgage rates slowed home sales in 2023

No other phrase defined the 2023 housing market like "mortgage rate lock-in effect" – a phenomenon that brought the industry to a standstill.

Advertisement Read in browser The Daily Money ALL THE MONEY NEWS YOU NEED TO KNOW Tue Jan 2 2024 Daniel de Visé | Personal Finance Reporter Happy New Year! It's Daniel de Visé with your Daily Money. No other phrase defined the 2023 housing market like "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. It signifies that 85% of current mortgage holders  are locked into sub-5%, pandemic-era mortgage interest rates, which acted as a disincentive for them to sell their home and buy another at a higher rate. Rates peaked at 7.79% in the week ending Oct. 26, according to Freddie Mac. But will things change this year? There are signs that market conditions will be improving, Swapna Venugopal Ramaswamy reports. Mortgage rates dropped steadily over the past seven weeks, averaging  6.61 % for a 30-year fixed mortgage in the week ending Dec. 28. The lower mortgage rates provided a boost to existing-home sales, which rose in November, up 0.8% from October, breaking a streak of five consecutive monthly declines, according to the National Association of Realtors. Shoppers look over holiday merchandise on display at a Target store in Orlando, Fla. John Raoux, AP Economic outlook brightens for 2024 This was the year that the post-COVID economy was finally supposed to stop defying gravity and topple into a recession. Instead, the stock market is roaring, Paul Davidson reports, fed by the growing belief that the Federal Reserve is on track to wrestle down inflation without causing a downturn, a rare feat known as a  "soft landing."   To be sure, growth is expected to slow amid the delayed effects of the Fed's aggressive interest rate hikes, the depletion of households'  excess pandemic savings and a pullback in federal government spending. But other factors are likely to keep the economy afloat, forecasters say, including near-record home and stock prices, a further easing of inflation to or near the Fed's 2% goal, and the central bank's tentative plans  to cut interest rates more sharply than previously anticipated. "2023 was a very good year," says Mark Zandi, chief economist of Moody's Analytics. "2024 will just be a good year." 📰 More stories you shouldn't miss 📰 In over our heads? Only half of Americans believe they can pay off their December credit card bill Runway disaster: 5 people dead, Japan Airlines plane catches fire after collision on Tokyo airport runway Is Social Security income taxable? Here's what you might owe on your benefits FAFSA alert: The long-awaited FAFSA is finally here. Now, hurry up and fill it out. Here's why. About The Daily Money Each weekday, The Daily Money delivers the best consumer news from USA TODAY. 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