The average rate on a 30-year loan declined to 6.87% this week, according to Freddie Mac.
The average weekly rate on the 30-year fixed mortgage declined to 6.87% from 6.95% a week prior, according to Freddie Mac.
Meanwhile, overall homebuying conditions have improved slightly: The inventory crunch is easing, home price growth is moderating, and cooling inflation supports the possibility of an interest rate trim by year end.
“These lower mortgage rates coupled with the gradually improving housing supply bodes well for the housing market,” Sam Khater, Freddie Mac’s chief economist, said in a press release.
A cooling housing market
National home prices rose 0.3% monthly in May, the smallest seasonally adjusted increase since January 2023, according to the Redfin Home Price Index. Yearly price gains decelerated over the past three months to 7.16% in May, from 7.25% in April and 7.24% in March.
cut their asking price — a small slice but the highest share since November 2022, according to Redfin. Still, the median sale price hit an all-time high in June at $394,000.
Month-over-month, the number of homes available for sale increased nearly 4% in May to 1.13 million from 1.09 million in April, according to data from Redfin. Annually, inventory increased by more than 17% compared to May 2023.
The age of inventory — or the length of time listings stay on the market — has also been increasing. More than three in five homes listed in May have been sitting on the market for more than a month without going under contract; that’s 60% higher than last year.
‘Step in the right direction’ for buyers
Homebuyers would likely need to see mortgage rates in the “low 6%” range before returning to the market en masse, said Allan Griego, owner of Austin Market Realty. Rates have more than doubled since 2021, according to Freddie Mac.
While a meaningful rate drop could entice buyers and sellers back to the market, improving affordability is not guaranteed.
“A drop in mortgage rates would bring both buyers and sellers back to the market, which could either accelerate price growth or pull it back depending on who comes back with more force,” Chen Zhao, Redfin economics research lead, said in a press release. “If sellers come back faster, prices would likely cool, but if buyers come back faster, prices would likely ramp up.”
A handful of housing indicators show that the market is still unaffordable compared to pre-pandemic times. According to the S&P CoreLogic Case-Shiller home price index, the national inventory level remains 32% lower than in May 2019, and home prices are over 50% higher than in 2019.
“[Recent] consecutive drops are a step in the right direction…but housing prices are still a barrier for most buyers,” Griego said. “Any [rate] movement in the opposite direction would deteriorate any current momentum.”
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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