Mortgage Rates Dip as the Housing Market Shows Signs of Improvement

Original Source Realtor.com

This week, mortgage rates saw a slight dip, with the average rate for a 30-year fixed home loan decreasing from 6.89% last week to 6.77% for the week ending July 18, according to Freddie Mac.

“The 30-year fixed-rate mortgage fell to its lowest level since mid-March, dropping 12 basis points from last week,” stated Sam Khater, Freddie Mac’s chief economist. “Mortgage rates are headed in the right direction, and the economy remains resilient, two positive incremental signs for the housing market.”

However, Khater also highlighted that homebuyers have not yet responded to these lower rates. He noted, “Purchase application demand is still roughly 5% below Spring, when rates were approximately the same. This is not uncommon; sometimes as rates decline, demand weakens, driven by buyers waiting to see if rates decline further before deciding to purchase.”

Current Housing Market Trends

Mortgage Rates Take a Turn

Recent data shows a housing market in a holding pattern, with inflated mortgage rates sidelining both buyers and sellers. Realtor.com® economist Ralph McLaughlin commented, “The small movements we observe this week favor buyers: no price growth, a slower market, and more price reductions.”

Realtor.com economist Jiayi Xu added, “Mortgage rate relief has not arrived as quickly as many expected, but the recent downward trend is encouraging news for homebuyers who have been hindered by high rates.”

The 10-year Treasury fell last week due to better-than-expected inflation readings, resulting in a 7 basis points drop in rates year-over-year, the first decline in nearly three years. Xu explained that moderate job reports and a cooling consumer price index should help the Fed gain confidence in the economy's direction, potentially leading to a rate cut signal in the upcoming FOMC statement.

Home Prices and Inventory

Home Prices Remain Flat

In June, the median home price was $445,000. Listing prices remained flat year over year for the week ending July 13, marking 25 consecutive weeks of price growth below 1%. Despite this, the median price per square foot grew by 3.4% in June, indicating that homes are still more expensive than last year.

Housing Stock Increases

The number of homes actively for sale continued to grow, with a 35.8% increase in listings for the week ending July 13 compared to last year. Fresh listings were also up by 8.8% for the same week compared to 12 months ago. New listings have increased 14 out of the past 15 weeks, which McLaughlin believes should help keep prices in check.

“Rising inventory is expected to gradually exert downward pressure on price growth, and falling mortgage rates will help lower borrowing costs, providing more relief to potential homebuyers,” said McLaughlin.

While the number of newly listed homes increased by 6.3% annually in June, this rate is roughly half of what it was two months ago. Buyers still see more than 30% fewer homes for sale compared to pre-pandemic levels. McLaughlin noted that the number of new homes for sale remains historically low and is still below 2017 to 2022 levels, even with recent improvements.

Pace of Home Sales

The typical home spent 45 days on the market in June. For the week ending July 13, homes spent an average of five more days on the market compared to the same period last year. This ties with last week, marking the longest additional time on the market since August 2023.

McLaughlin pointed out, “A longer time on the market means buyers won’t have to move as quickly as last year, while sellers will need to be more patient.”

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