The 30-year mortgage rate has fallen to its lowest level since May 2023, sparking interest among potential homebuyers. The fixed-rate 30-year mortgage averaged 6.47% this week, while the 15-year rate dipped to 5.63%. Despite the drop in rates, mortgage applications for home purchases remained flat, indicating that buyers may not be ready to make a move just yet.
According to Sam Khater, Freddie Mac’s chief economist, the decline in mortgage rates should increase prospective homebuyers‘ purchasing power and pique their interest in making a move. However, Joel Kan, deputy chief economist at the Mortgage Bankers Association, noted that while there was a jump in refinance applications, there hasn’t been a surge in mortgage purchase applications. Homebuyers may be waiting for rates to drop further before entering the market.
Lisa Sturtevant, chief economist for Bright MLS, predicts that the second half of the year could see further drops in mortgage rates, but potential homebuyers may remain patient. Despite the increased buyer leverage in the market, buyers may be waiting for the right moment to make a move.
Seasonal factors and affordability also play a role in the current housing market dynamics. With schools starting up soon, families may be hesitant to switch districts, impacting buyer motivation. Jessica Lautz, deputy chief economist at the National Association of Realtors, highlighted that lower rates are improving affordability, with the current average monthly payment $285 lower than in October 2023. However, high home prices continue to be a barrier for many renters looking to enter the market.
Inventory levels are also a key factor to consider in the current housing market. Sellers are paying attention to mortgage rates, with new listings up 5.9% year-over-year, according to Redfin. Despite this increase, supply remains low compared to recent years, indicating that market dynamics may not shift significantly until new listings pick up.
Overall, while the drop in mortgage rates has generated interest among potential homebuyers, the housing market remains complex and multifaceted. Buyers may be waiting for further rate drops, seasonal factors could impact buyer motivation, and affordability and inventory levels continue to be challenges in the current market. As the housing market continues to evolve, it will be interesting to see how buyers and sellers navigate these dynamics in the coming months.