Mortgage rates continued to fall this week, a trend that has been accompanied by an increase in demand for home purchases, but high house prices remain a barrier for many would-be buyers.
Freddie Mac’s latest Primary Mortgage Market Survey released Thursday showed that the average rate for the benchmark 30-year fixed-rate mortgage fell to 7.03% this week, down from 7.22% last week but up from 6.33% a year ago.
The rate for a 15-year fixed mortgage also fell, averaging 6.29%, down from 6.56% last week. A year ago, the 15-year fixed rate averaged 5.67%.
These housing markets are expected to see double-digit sales growth in 2024
Although mortgage applications have risen for five consecutive weeks, high mortgage rates have dampened consumer demand over the past year and severely limited inventory. This is because sellers who locked in a low mortgage rate before the crisis have been reluctant to sell as rates remain near two-decade highs, leaving few options for eager would-be buyers.
As inventories remain low, home prices remain high, rising for the eighth consecutive month in September, according to the latest S&P CoreLogic Case-Shiller index released last week.
Pending home sales fall to record low as high mortgage rates take a toll
Data from Redfin shows that US home prices rose 3.4% year-on-year in October, while the number of homes for sale fell 9.98%. According to the real estate group, the median home price in October was $413,504.
Many economists expect prices to continue to fall, but do not expect a quick fix to the housing affordability crisis.
“Looking ahead, we forecast that the sustained improvement in inflation will bring the mortgage rate down to 6.5% by the end of 2024,” economist Jiayi Xu said in a statement. “However, as mortgage rates remain elevated, persistently high housing costs indicate that the cooling trend in the nation’s housing market is likely to persist.”
