In a welcome development for potential homebuyers, mortgage rates have fallen for the second consecutive week. However, economists caution against expecting significant declines in the near future.
According to Freddie Mac’s latest Primary Mortgage Market Survey released on Thursday, the average rate on the benchmark 30-year fixed mortgage dropped to 6.74% this week, down from 6.88% last week. A year ago, the average rate on a 30-year loan stood at 6.60%.
Similarly, the average rate on the 15-year fixed mortgage decreased to 6.16% from 6.22% the previous week. This compares to a rate of 5.90% for the 15-year fixed note recorded one year ago.
Sam Khater, Freddie Mac’s chief economist, noted, “The 30-year fixed-rate mortgage decreased again this week, with declines totaling almost a quarter of a percent in two weeks’ time.” He added, “Despite the recent dip, mortgage rates remain high as the market contends with the pressure of sticky inflation. In this environment, there is a good possibility that rates will stay higher for a longer period of time.”
While the drop in rates has spurred an increase in home-purchase applications leading into the typically busy spring season, demand still lags significantly behind levels seen a year ago. Elevated rates and record-high home prices continue to deter both buyers and sellers from entering the market.
Data from the Mortgage Bankers Association’s index of mortgage applications revealed a 7.1% jump for the week ended March 8, compared with a 9.7% increase the previous week. However, application volume remains 11% lower compared to the same time last year.
With no immediate relief expected from mortgage rates or soaring home prices, the housing affordability crisis appears entrenched for the time being. Prospective homebuyers are left weighing their options amidst the challenging market conditions.
Hannah Jones, senior economic analyst at Realtor.com, commented, “As the spring heats up, some buyers may hold off in the hopes that mortgage rates move lower, but either choice (buying now or waiting) comes with tradeoffs.” She added, “Spring buyers may see higher mortgage rates, but summer buyers are likely to see higher home prices, and uncertainty around mortgage rates.”
