Mortgage rates fell for a third week in a row, falling below 7%

Washington
CNN
—

In good news for Americans still dealing with a tough housing market, mortgage rates fell for the third week in a row.

A typical 30-year fixed-rate mortgage averages 6.94%. According to Freddie Mac data released Thursday, the rate for the week ended May 23 fell from last week’s average of 7.02%. This is the lowest level since early April and remains below the key 7% threshold.

After moving sideways throughout March, mortgage rates began to climb in late April as economic data showed a cooling of inflation stalled earlier in the year. The mortgage rates benchmark tracks the 10-year U.S. Treasury yield, which moves in anticipation of Federal Reserve decisions on interest rates.

Stubbornly high inflation this year has dashed hopes that the central bank could cut interest rates in the spring or summer. But there’s finally some good news on that front: The consumer price index for April, released last week, It showed that inflation did not increase. Bond yields have mostly retreated this month.

“Spring homebuyers got an unexpected windfall this week as mortgage rates fell below the seven percent threshold for the first time in a month,” Freddie Mac Chief Economist Sam Kader said in a release.

Some central bank officials said earlier this week They will not raise interest rates Again a few said they expect to cut rates this year. This is good for lower mortgage rates.

But for now, the housing market’s recovery is stalling. Sales of previously owned homes, which make up the bulk of the housing market, fell for a second straight month in April, the National Association of Realtors said Wednesday. This is in stark contrast to the previous year’s sales surge.

Mortgage rates have declined from a two-decade peak reached last fall, but they are still higher than anything seen in the decade to 2022. This is not the only major issue plaguing the housing market.

Another is that, despite some steady improvements in recent months, housing that has not kept pace with demand continues to be low. This is because some homeowners have decided not to sell their homes because they have low mortgage rates before the Fed starts raising interest rates in 2022.

The pace of home construction has not sufficiently eased the pressure on the housing market to meaningfully improve affordability. Housing starts rebounded to a seasonally adjusted annual rate of 1.36 million units in April after falling sharply the previous month, according to a separate report released last week. But for many Americans the trend toward easing the market is nowhere close.

“To truly bring the housing sector into balance, the country needs about 1.6 million or more over a few years,” Lawrence Yun, NAR’s chief economist, said in the report.

“The housing shortage is not going away,” he said.

However, there are some steps in the right direction. Housing starts continued to improve in April for the fourth straight month, the NAR reported Wednesday. Total housing inventory at the end of April was 1.21 million units, up 9% from the previous month and up 16.3% from a year earlier, according to NAR data, adding that “we still have a tight inventory,” Yun said.

House prices continue to rise painfully

Another hurdle is that home prices are painfully high and out of reach for many Americans, especially first-time buyers.

The NAR reported home prices on Wednesday Continued to rise in April, the median price of an existing home rose 5.7% to $407,600. This was the fourth consecutive monthly expansion and a record for April prices.

According to the S&P CoreLogic Case-Shiller US National Home Price Index, other measures of home prices show the same: US home price growth accelerated in February to the fastest annual pace since November 2022. Home prices in San Diego, Chicago and Detroit grew the most in February.

Rising prices and high borrowing costs with insufficient housing on the market have created a tough housing market for many. There is President Joe Biden Proposed some solutions Improving affordability would require congressional approval, such as tax breaks for middle-class buyers and legislation to promote housing construction.

This story has been updated with additional details and context.