The cost of US housing loans fell again this week, with the average interest rate for 30-year mortgages dropping to the lowest level since early April. #2024 Macro Outlook # Product buyers of mortgage real estate said rates fell from 6.95% last week to 6.87%. A year ago, the average rate was 6.67%. This is the third consecutive week of declining average interest rates, which have mostly hovered around 7% since April. Higher mortgage rates could add hundreds of dollars a month in costs to borrowers, limiting options for homebuyers. The borrowing cost of the 15-year fixed-rate mortgage, which is popular with homeowners who refinance, fell this week as well, from an average of 6.17% last week to 6.13%. A year ago, its average was 6.03%. According to Sam Khater, chief economist at Realtor.com,"Mortgage rates have fallen for three consecutive weeks as signs of inflation cool down and the market anticipates future rate cuts by the Fed." Housing loan rates are affected by a variety of factors, including bond market reactions to Fed rate policies and changes in the yield on 10-year US Treasury bonds, which lenders use as a benchmark for housing loan pricing. Recent declines in yields, thanks to some economic data that shows slower growth, may help curb inflationary pressures and persuade the Fed to begin lowering its key rate from its highest level in over 20 years.
Home buyers with mortgages in the United States said on Thursday (June 20) that rates fell from 6.95% last week to 6.87%. A year ago, the average rate was 6.67%.
This is the third consecutive week of declining average interest rates, which have mostly hovered around 7% since April. Higher mortgage rates could add hundreds of dollars a month in costs to borrowers, limiting options for homebuyers.
The borrowing cost of the 15-year fixed-rate mortgage, which is popular with homeowners who refinance, fell this week as well, from an average of 6.17% last week to 6.13%. A year ago, its average was 6.03%.
According to Sam Khater, chief economist at Realtor.com,"Mortgage rates have fallen for three consecutive weeks as signs of inflation cool down and the market anticipates future rate cuts by the Fed."
Housing loan rates are affected by a variety of factors, including bond market reactions to Fed rate policies and changes in the yield on 10-year US Treasury bonds, which lenders use as a benchmark for housing loan pricing.
Recent declines in yields, thanks to some economic data that shows slower growth, may help curb inflationary pressures and persuade the Fed to begin lowering its key rate from its highest level in over 20 years.
Fed officials said last week that inflation rates have fallen further to the 2% target level in recent months and hinted that they expect to cut the benchmark rate once this year. The Fed had previously anticipated up to three rate cuts by 2024.
Economists say that long-term mortgage rates are unlikely to fall significantly before the Fed starts lowering short-term interest rates.
"However, mortgage rates could still be well above the range of 3.5% to 5% before the pandemic," said Realtor.com economist Jiayi Xu.
The average interest rate for a 30-year mortgage is still close to the highest level in 20 years, which has discouraged many potential homebuyers. The rate increase has led to a lackluster spring buying season. In March and April, sales of existing US homes declined as buyers struggled with rising borrowing costs and prices.
Another factor that constrains the real estate market is tight supply of homes for sale. While this has risen this year, partly due to longer selling times for properties, home inventory remains well below pre-pandemic levels. A key factor is that many homeowners who purchased or refinanced over two years ago are now reluctant to sell and give up fixed-rate mortgages of less than 3% or 4% - a trend that real estate experts call the 'lock-in' effect.
According to Realtor.com, at the end of last year, more than 50% of mortgage homes had rates of 4% or lower, and 87% of homes had rates of 6% or lower.
"Although mortgage rates are unlikely to fall below 4%, rates of around 6% could strongly encourage many sellers to list their homes, increasing overall inventory and putting downward pressure on home prices," said Jiayi Xu.
Meanwhile, the US Census Bureau's building department said on Thursday that construction of single-family homes, which make up most of the country's housing construction, fell at an annual rate of 5.2% last month after seasonal adjustments to 982,000 units.
April data was revised higher to show a single-family start rate of 1.036 million, up from the previously reported 1.031 million. In May, the number of permits for single-family home construction fell 2.9% to 949,000.