Mortgage Rates Continue Downward Trend
Mortgage rates continued their decline, with the average rate for a 30-year fixed home loan dropping from 7.09% last week to 7.02% for the week ending May 16, according to Freddie Mac.
“Mortgage rates decreased for the second consecutive week,” said Sam Khater, Freddie Mac’s chief economist. “The slight easing of inflation, reflected in the 10-year Treasury yield dip, has contributed to the lower mortgage rates. This small decrease may provide a bit more flexibility in the budgets of prospective homebuyers.”
Despite the recent dip, mortgage rates have fluctuated between the mid-6% range and over 7%, so it remains uncertain whether this week’s change will impact the sluggish spring housing market.
“Mortgage rates remain stubbornly close to 7%,” says Realtor.com® economist Jiayi Xu. “To see mortgage rates dip further below 7%, we need consistent evidence showing inflation heading back towards 2%.”
Increase in Housing Inventory
Alongside falling rates, the housing market has seen a significant increase in inventory, reaching the highest level since August 2020.
“Last week saw the highest number of homes for sale since August 2020, a significant milestone,” says Hannah Jones, Realtor.com’s senior economic research analyst. “The recent strength in listing activity means buyers are seeing more homes for sale than they have in almost four years.”
Latest Real Estate Data Insights
Despite the recent dip, mortgage rates remain high, driven by a robust economy. The Federal Reserve has yet to lower key interest rates, as strong economic reports continue. This week, inflation fell from 3.5% in March to 3.4% in April.
“This week’s consumer price index inflation data showed improvement, a welcomed sign of progress which can positively affect mortgage rates,” says Jones. “This CPI data may influence mortgage rates in the near term.”
Xu adds, “While this improvement is a baby step forward, it’s expected to foster stability in mortgage rates at their current level and possibly trigger further declines.”
Buyers Adapting to High Mortgage Rates
Some buyers are compensating for high mortgage rates by making larger down payments, reducing their loan sizes and minimizing housing payments.
Increase in New Listings
For the week ending May 11, the total number of homes for sale was 35% higher than the previous year, marking 27 consecutive weeks of increased inventory compared to the previous year.
“Seller activity continued to climb annually last week and accelerated relative to the previous week’s growth,” says Jones. However, the annual amount of new listings was lower than almost every week back to early February, indicating a slowdown in new listings growth.
New listings were up 6.6% from a year ago for the week ending May 11.
“New listing activity will continue to be influenced by mortgage rate movement, but cooling labor market and inflation data could mean things are moving in the right direction,” says Jones.
Home Prices Remain Stable
The median list price remained unchanged for the week ending May 11, staying at 0.0% growth year over year. The median-priced home cost $430,000 in April.
A higher availability of budget-friendly homes in the $200,000 to $350,000 range may have helped to keep list prices stable.
Slower Home Sales
The pace of home sales has slowed, with homes spending an extra day on the market for the week ending May 11 compared to the same time last year. The typical home spent 47 days on the market in April.
“Homes sold slightly slower than one year ago last week but remained within a tight margin of the previous year, as has been the trend over the last couple of months,” says Jones.
Future Outlook
If mortgage rates continue to improve, it could bring buyers back in large numbers, increasing competition and speeding up sales.
“Improving mortgage rates could bring buyers back en masse, driving up competition and leading to a quicker pace of sale,” says Jones.