Rates Cool For The First Time In Five Weeks

Average mortgage rates declined for the first time in five weeks following cooling employment, a sign of easing inflation.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 7.09%, down from the week prior’s 7.22%. A year ago at this time, the 30-year FRM averaged 6.35%.

This is the first reversal after a multi-week upward streak that sent rates to their highest point since November 2023. Those weeks of increases pushed the median monthly housing payment to a new record high of $2,894 during the four weeks ending May 5, up 14% YOY.

Recent government data found that the U.S. economy added 175,000 in April, below expectations of 240,000, while unemployment increased to 3.9%.

This was good news for the Central Bank, which is watching the jobs report closely in its inflation fight. Comments from Federal Reserve Chair Jerome Powell suggested that the Fed still intends to cut rates at some point, not hike again, leading to easing treasury yields.

“A weaker jobs report is typically consistent with a cooler economy and less inflationary pressure,” Danielle Hale, chief economist at Realtor.com, said in an email to Money.com.

If rates sustainably move down in the coming weeks, more buyers and sellers may enter the market between now and June, a period which is typically a busy season for homebuying.

But even if rates keep falling, demand for limited inventory will keep pressure on prices, which are already at all-time highs.

At the same time, rate-locked homeowners have no incentive to sell without steep rate cuts. Americans who bought or refinanced during the pandemic when rates were ultra-low could lose big if they commit to a near-7% rate.

“Many potential sellers remain hesitant to list their home and part with lower mortgage rates from years prior, adversely impacting supply and keeping house prices elevated. These elevated house prices add to the overall affordability challenges that potential buyers face in this high-rate environment,” the author of Freddie Mac’s analysis commented.

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