Mortgage rates retreated last week, dropping more than ten basis points in a one-week period.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.78%, down from 6.96% the week prior. A year ago at this time, the 30-year FRM averaged 5.54%.
The 15-year fixed-rate mortgage reversed course as well, down a whopping 24 bps from 6.30% to 6.06%. A year ago, it averaged 4.75%.
“As inflation slows, mortgage rates decreased this week,” said Sam Khater, Freddie Mac’s Chief Economist. “Still, the ongoing shortage of previously owned homes for sale has been a detriment to homebuyers looking to take advantage of declining rates.”
Existing-home sales saw their most sluggish levels in 14 years in June.
At the same time, the median existing-home sales price for June jumped to $410,200, the second-highest price since at least 1999 when NAR began collecting data. Last year, June 2022 saw the highest price ever at nearly $414,000.
Home price appreciation has strengthened in the last month after a five-month period of decline. Demand remains elevated and is increasing through the summer, with prices rising accordingly.
“There are simply not enough homes for sale,” Lawrence Yun, chief economist for NAR, said. “The market can easily absorb a doubling of inventory.”
NAR’s data is derived from June closings, which reflect contracts signed in April and May when rates were closer to 6%. June rates stayed firmly near 7%, which means NAR’s next release may reveal a far worse drop.
If rates continue declining and builders keep adding inventory, sales should pick up.
Rates have responded to positive inflation data from the past few weeks. Economists expect the FOMC to raise rates by a quarter point one more time at its July meeting next week and then pause.
Though rates are sure to spike immediately after the Fed’s meeting, continued positive inflation data should bring them back to Earth. Most housing economists expect rates to fall under 6% by year-end.
“I think it’s reasonable to assume that rates will come down a bit in the second half of the year and stabilize if the Fed takes its foot off the monetary-tightening pedal,” First American deputy chief economist Odeta Kushi noted.
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