Mortgage rates have slipped to their lowest levels since May.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.60%, down from the week prior’s 6.66%. A year ago at this time, the 30-year FRM averaged 6.15%.
The 15-year fixed fell to 5.76% from 5.87%. A year ago, it averaged 5.28%.
“This is an encouraging development for the housing market and in particular for first-time homebuyers who are sensitive to changes in housing affordability,” said Sam Khater, Freddie Mac’s Chief Economist.
“However, as purchase demand continues to thaw, it will put more pressure on already depleted inventory for sale.”
Rates are the primary concern of most potential buyers, but the market remains crippled by ongoing stock shortages that have pushed home prices higher. Competition for the few affordable options on the market is still hot.
“Falling rates are definitely a positive for buyers, but a focus on rates alone misses just how challenging the market will continue to be for prospective homebuyers in 2024,” said Lisa Sturtevant, chief economist for Bright Multiple Listing Service, told CNN.
But cooling borrowing costs can also lead to inventory improvements. Homebuilders, energized by the possibility of greater demand, applied for more permits for both single-family and multi-family properties in December. Permits offer an indication of future construction.
Homebuilders are taking advantage of buyers’ appetite for new construction through price reductions and sales incentives, NAHB reported, and reaping the benefits. Purchase applications for new homes were up more than 22% in December.
Analysts expect rates to continue their downward trend in 2024, though how quickly that will happen is up for debate. Much depends on when the Central Bank decides to make cuts, and the ride may be a bit bumpy, Bess Freedman, CEO at Brown Harris Stevens, told CBS.
“They’ve already started to come down, and I believe they will continue to go down, but not in a strictly linear fashion.”
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