The average rate on the popular 30-year fixed-rate mortgage fell to 7.09% this week from 7.22% last week, marking the first decline in over a month amid signs of slowing economic activity. However, despite this dip, mortgage rates remain too high to provide a significant boost to the housing market. According to mortgage finance agency Freddie Mac, the average rate during the same period last year was 6.35%. The 15-year fixed-rate mortgage also saw a decline, dropping to 6.38% from 6.47% last week, compared to an average of 5.75% a year ago.
The decline in mortgage rates coincides with a drop in the 10-year Treasury yield, following recent data showing a moderation in economic and job growth. Nevertheless, affordability remains a significant challenge for potential buyers in this high-rate environment. "An environment where rates continue to hover above seven percent impacts both sellers and buyers," said Sam Khater, Freddie Mac's (FMCC) chief economist. "Many potential sellers remain hesitant to list their home and part with lower mortgage rates from years prior, adversely impacting supply and keeping house prices elevated. These elevated house prices add to the overall affordability challenges that potential buyers face in this high-rate environment."
Market Overview:
-US mortgage rates see their first decline in over a month, with the 30-year fixed rate falling to 7.09%.
-Despite the decrease, rates remain significantly higher than last year, hindering a substantial housing market recovery.
Key Points:
-Slowing economic activity and recent data point to a potential moderation in interest rates.
-The decline in mortgage rates coincides with a drop in the 10-year Treasury yield.
-High housing prices, fueled by limited seller inventory, continue to pose affordability challenges for buyers.
Looking Ahead:
-The continued presence of mortgage rates above 7% impacts both buyers and sellers.
-Potential sellers remain hesitant to list homes, further constraining supply and keeping prices elevated.
-A significant boost to the housing market may require a more substantial and sustained decrease in mortgage rates.
Potential sellers holding onto historically low rates continue to constrain housing supply, causing home prices to remain elevated and further exacerbating affordability challenges for prospective buyers. Additionally, declining mortgage applications and existing home sales reflect the market's struggle with higher borrowing costs. According to the Mortgage Bankers Association, total mortgage application volume was down 5.6% last week compared to the prior week, with refinancing applications dropping 8% and purchase applications decreasing by 4%.
Despite these challenges, some housing market analysts remain optimistic that the market will eventually stabilize. “As economic uncertainty continues and inflation remains elevated, we expect mortgage rates to fluctuate but eventually settle into a range that can support a balanced housing market,” noted Khater. However, with the Federal Reserve likely to keep rates higher for longer to combat inflation, potential homebuyers and sellers may continue to face affordability constraints and volatility in the near term.
