FX168 Financial News (North America) — Mortgage interest rates have declined for the third week in a row, pushing the 30-year interest rate down to the lowest level in more than a month for the first time. The last time interest rates on 30-year mortgages fell below 7% was in mid-April.

According to data released by Freddie Mac (Freddie Mac) on Thursday (May 23), the average interest rate on a 30-year fixed mortgage is 6.94%. Compared to last week, this is a drop of 8 basis points — one basis point is equivalent to 1 percent. A year ago, the 30-year average was 6.57%.

The average interest rate for a 15-year mortgage was 6.24%, down from 6.28% last week. A year ago, the interest rate for a 15-year term was 5.97%.

According to Fannie Mae's weekly mortgage rate report, the data is based on thousands of mortgage applications received from lenders across the country, which are submitted to Fannie Mae when borrowers apply for a mortgage.

As of Thursday afternoon, the average interest rate for 30-year fixed mortgages was 7.09%, according to data released daily by Mortgage News. According to a survey by the Association of Mortgage Bankers, the 30-year interest rate was 7.01% as of May 17.

All parties in the real estate industry — from real estate agents to mortgage lenders to homeowners looking to buy or refinance a home — may see falling interest rates as a good sign.

There's a good reason for this: because the lower the interest rate, the more affordable it is to buy a home based on the monthly cost of housing. If a buyer uses a 30-year mortgage to pay a house with a median selling price of $429,500,000 at an interest rate of 6.94%, the down payment is 20%, according to data calculated by the real estate website Realtor.com for MarketWatch, and they need to pay approximately $2,855 per month, which includes principal and interest, as well as taxes and insurance.

To be able to afford these expenses each month, a potential home buyer would need to earn $9517 per month or $114199 per year. Realtor.com believes that if buyers spend less than 30% of their income on housing, then the monthly payment is “reasonable.”

At the same time, other indicators provide further reason for optimism: the supply of housing is also increasing, including new and second-hand housing.

Therefore, if the pace of supply and the decline in interest rates continue, the housing market may be about to recover.

Sam Khater, Fannie Mae's chief economist, said in a statement: “Home buyers unexpectedly reaped benefits this week because mortgage rates fell below 7% in more than a month.”

“More supply combined with the recent trend of falling interest rates is an encouraging sign for the housing market,” he added.

Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a statement: “May was a better month for the mortgage market. The past 3 weeks showed a decline in mortgage interest rates and an increase in loan applications.” “Interest rates below 7% are good news for potential homebuyers, and the Mortgage Bankers Association expects this trend to continue to decline this summer.”

Meanwhile, homebuilders cut prices drastically to attract buyers, but analysts think this may not be enough. Current data shows that due to pressure from high interest rates, sales of newly built homes in the US fell by nearly 21% in April, while the purchasing power of homebuyers was limited due to high interest rates and housing prices that remained high.

The US Department of Commerce reported on Thursday (May 23) that sales of newly built homes fell 4.7% in April to an annualized rate of 634,000, lower than the 665,000 revised last month.

The figure is seasonally adjusted to indicate how many homes would be built throughout the year if builders continued to build at the same rate each month.

This rate fell short of Wall Street's expectations. Economists expect the total number of new home sales in April to reach 675,000. New home sales only rose in the Midwest, while declined in the Northeast, West, and South. Midwest sales increased 10%. Sales declined most significantly in the Northeast, where they fell by almost 21%.

The March data has been revised. New home sales rose 5.4% after the revision in March compared to the initial estimate of an 8.8% increase in sales.

New home sales data fluctuates greatly on a monthly basis and is frequently revised. The median price of new home sales in April fell from $439,500 last month to $433,500. About 44% of new homes sold for less than $400,000 in April.

The supply of new homes increased 7.1% from March to April. Compared to a year ago, the supply of new homes also increased by 21.3%. Overall, sales of new homes fell 7.7% compared to the same period last year.

From the perspective of builders, they are concerned that high interest rates will affect buyers' decisions to buy new homes, so they are cutting prices and increasing incentives to attract buyers. According to the American National Housing Association's latest confidence survey, about 25% of builders cut prices in May.

According to real estate agency Redfin, in the US, about 33.4% of single-family homes listed for sale in the first quarter were new homes, which is a significant increase from before the pandemic.

Navy Federal Credit Union economist Robert Frick said in a statement: “The new home sales report completed this week's triple blow to the housing market.” He said, “Construction activity has been weak, and sales of existing homes have fallen short of expectations. Sales of new homes have now declined sharply, and overall they are still weak.” “Lower interest rates will help builders and buyers, but not least because we need strong construction in the face of weak construction activity in the 2010s. These all underscore our lack of progress in addressing the country's housing crisis.”

Thomas Ryan, an economist focused on North America at KITU Macro, stated, “Despite the slight disappointment in April data, we are still optimistic about the new housing market. We expect mortgage interest rates to drop from now on, which will attract more buyers,”

He added: “However, the reduction will not be enough to end the 'lock-down' of mortgage interest rates, which will maintain the limited options in the existing housing market and push buyers to build new homes.” “We expect sales of new homes to reach 800,000 annual units by the end of 2025.”

Bess Freedman, CEO of real estate company Brown Harris Stevens, said: “The market still faces high interest rates, low inventory, and anxious buyers and sellers.”

She added, “We're seeing that consumers are starting to accept current interest rates; they still need to buy and sell homes for various reasons (divorce, marriage, having kids, work).” “What's next? Everyone is watching elections, inflation, and tax policies for the next year or so.”