The 30-year fixed-rate mortgage rate decreased for the fifth consecutive week, averaging 6.27% for the week of April 13, according to the latest Primary Mortgage Market Survey from Freddie Mac. A year ago at this time, the rate averaged 5%.
“Incoming data suggests inflation remains well above the desired level but showing signs of deceleration,” says Freddie Mac chief economist Sam Khater. “These trends, coupled with tight labor markets, are creating increased optimism among prospective home buyers as the housing market hits its peak in the spring and summer.”
The optimism is not translating to sellers in the existing-home market, with data from Redfin suggesting new listings of homes for sale dropped 25% from a year earlier during the four weeks ending April 9. The number of new listings has decreased in each of the last eight months as mortgage rates remain over double levels seen for the majority of 2022. As a result, pending sales have declined 19% year over year nationally, according to Redfin.
New listings fell in each of the 50 most populous metros, with the largest declines occurring in large California metros such as Sacramento (47% year-over-year declines), Oakland (47% decline), San Francisco (43.2% decline), San Jose (42.9% decline), and San Diego (41.4% decline).
According to Redfin, 85% of homeowners have rates far below 6% and, as a result, are reluctant to list their homes and give up their lower rates. Well-priced homes in the existing-home market are being “snapped up” in bidding wars in markets where demand is outpacing supply.
While pending sales in the existing-home market are down, home buyers are increasingly enticed by lower mortgage rates and entering the market. According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications survey, mortgage applications increased 5.3% from the previous week for the week ending April 7. The seasonally adjusted purchase index increased 8% from the previous week.
“Prospective home buyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing 8%,” says MBA senior vice president and chief economist Mike Fratantoni. “Refinance application volume was a mixed bag with total volume essentially flat, conventional volume down for the week, but VA refinance volume increasing. The level of refinancing activity remains almost 60% below last year, as most homeowners are currently locked in at much lower rates.”
According to Redfin chief economist Daryl Fairweather, even if mortgage rates decrease more in the coming weeks, the limited supply of homes for sale would “remain a major obstacle for would-be buyers.”
“Rates dipping below 6% would probably pique the interest of more buyers, but enough homeowners have rates in the 3% or 4% range that we’re unlikely to see a big uptick in new listings,” Fairweather says.
This story originally appeared on Livabl’s sister site BUILDER Online.
