Mortgage Rates Fall as Housing Market Stalls
Mortgage Rates Fall After Inflation Shows Signs of Cooling
Following a period of stability in March, mortgage rates began to rise towards the end of April due to concerns that inflation might not be under control after all. However, recent positive developments have led to a drop in mortgage rates, offering some relief to potential homebuyers.
As homebuyer demand stalls with mortgage rates approaching 8%, available inventory of unsold homes on the market increased by 1.3% this week. That's very late in the season for inventory to increase.
We can start to see price pressures for those homes sitting on the market.… pic.twitter.com/okYyNyxtsv
— Mike Simonsen 🐉 (@mikesimonsen) October 2, 2023
Source: Twitter/Mike Simonsen
This decrease is linked to the 10-year US Treasury yield, which fell as a result of inflation showing signs of moderation. The April Consumer Price Index data indicated that inflation remained stable, leading to a decrease in bond yields.
“This week brought unexpected relief for spring homebuyers, with mortgage rates dipping below seven percent for the first time in over a month,” stated Sam Khater, Freddie Mac’s chief economist.
Federal Reserve Policy and Mortgage Rates
Some Federal Reserve officials have recently suggested that they are unlikely to raise interest rates further, and some have even hinted at the possibility of rate cuts later in the year. This is positive news for those hoping for even lower mortgage rates in the future.
Housing Market Challenges Persist Despite Lower Rates
While lower mortgage rates are a welcome sign, the housing market recovery has stalled due to several challenges.
-
Limited Housing Inventory: A key issue is the ongoing shortage of housing, which continues to put upward pressure on prices despite some improvement in recent months. This shortage is partly caused by homeowners who are reluctant to sell and give up the low mortgage rates they secured before recent increases.
-
Home Prices Remain High: Even with lower mortgage rates, high home prices continue to make homeownership difficult, especially for first-time buyers. The median price of existing homes rose by 5.7% compared to a year earlier, reaching a record high of $407,600 in April, according to the National Association of Realtors (NAR).
Looking Ahead
There are some signs of a potential future improvement in the housing market. Housing supply continued to increase in April for the fourth consecutive month, with total inventory rising 9% from March and 16.3% from a year earlier.
President Joe Biden has proposed potential solutions to improve affordability, such as tax credits for middle-class homebuyers and legislation aimed at increasing homebuilding. However, these initiatives would require congressional approval.
While the housing market faces some significant challenges, the recent decrease in mortgage rates offers a glimmer of hope for potential homebuyers.
Read more such news on techinsighttoday
Thank you so much for reading.