Falling rates offer some relief for potential homebuyers
The 30-year fixed-rate mortgage has reached its lowest level in nearly three months, according to the latest Primary Mortgage Market Survey from Freddie Mac.
Freddie Mac reported that the 30-year fixed-rate mortgage (FRM) averaged 6.86%, its lowest level in nearly three months. This was down slightly from 6.87% the previous week. Meanwhile, the 15-year fixed-rate mortgage averaged 6.16%, up from 6.13% last week and 6.06% a year ago.
Freddie Mac chief economist Sam Khater expressed optimism about the downtrend: “By historical standards, the economy is in good shape, and we expect rates to continue to come down over the summer months, bringing additional homebuyers back into the market,” he said in the report.
Despite the lower rates, mortgage applications have remained stagnant.
“Lower rates, however, were still not enough to entice refinance borrowers back, as most continue to hold mortgages with considerably lower rates,” said Joel Kan, deputy chief economist of the Mortgage Bankers Association.
Refinance applications were 26% higher than the same week one year ago, while home purchase applications increased by 1% week-over-week.
The housing market continues to face affordability challenges, with the median sale price of a new home in May at $417,400. New single-family home sales fell 11.3% last month to an annual pace of 619,000, underperforming economists’ expectations.
“Families are delaying purchases of new homes because of high mortgage rates,” said NerdWallet mortgage expert Holden Lewis. “The average rate on a 30-year mortgage was 7.06% in May. In May 2023, the average rate was 6.43%. So it’s little surprise that new home sales were 16.5% lower in May compared to a year before — even though the median price dropped 1%. Sales will rebound when mortgage rates drop to 6.5% or lower.”
Odeta Kushi, deputy chief economist at First American, commented: “Although housing supply is still historically low, the slight uptick in inventory compared to a year ago might help to further ease some pressure on home prices.
“Finally, the Federal Reserve has signaled that a rate cut may be in store for this year if inflation continues to cool, which may lead to an easing in mortgage rates. While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help – so the dream of homeownership isn’t boarded up just yet.”
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