Falling mortgage rates brought a brief clearing to the gloomy housing market this week.
Thirty-year, fixed-rate mortgages averaged 6.94 percent Thursday, according to a survey conducted by Freddie Mac. It was the first time since the start of April that the average rate for the typical mortgage dropped below 7 percent.
The rate in Freddie Mac’s survey declined each of the past two weeks as well, raising hopes that it could keep trending down. The average rate last week was 7.02 percent, though the average a year ago was 6.57 percent — which seemed high at the time.
Nevertheless, it’s welcome news for buyers, who could use all the help they can get during the spring homebuying season.
“Greater supply coupled with the recent downward trend in rates is an encouraging sign for the housing market,” Freddie Mac senior economist Sam Khater said in a statement.
Khater appeared to be referring to a report released this week by the National Association of Realtors that showed for-sale inventory at the end of April was 1.21 million homes, up 9 percent from March and 16.3 percent from a year before.
Unsold inventory amounted to a 3.5-month supply at last month’s sales pace, up from both the previous month and April 2023. Low inventory has been depressing home sales since mortgage rates began climbing in 2022.
Even with rates in decline, buyers still face high prices. The median sale price of existing homes in April rose 5.7 percent year-over-year to $407,600 — the highest ever recorded by NAR for the month. All four regions that NAR tracks reported price gains.
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NAR chief economist Lawrence Yun said “the pace of price increases should taper off since more housing inventory is becoming available.” A surge of buyers, which could occur if mortgage rates keep falling, would push prices in the other direction, however. So far this spring, potential buyers have been more cautious than expected.
The industry continues to watch the Federal Reserve’s commentary on interest rates. This month, policymakers decided to keep rates elevated as inflation remains above the 2 percent target and the economy remains heated, according to Bloomberg.