Rates Fall But Remain Near 7%

Mortgage rates fell further last week but remain near 7%, putting pressure on affordability.

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.95%, down from the week prior’s 6.99%. A year ago at this time, the 30-year FRM averaged 6.69%.

The 15-year also fell to 6.17% from 6.29%. A year ago at this time, it was 6.10%.

“Mortgage rates continued to fall back this week as incoming data suggests the economy is cooling to a more sustainable level of growth,” said Sam Khater, Freddie Mac’s Chief Economist.

“Top-line inflation numbers were flat but shelter inflation, which measures rent and homeownership costs, increased showing that housing affordability continues to be an ongoing impediment for buyers on the house hunt.”

The consumer price index, released this week, found that inflation remained flat month-over-month in May, but increased 3.3% YOY.

Excluding volatile food and energy prices, core CPI increased 0.2% from April and 3.4% from a year ago, compared with estimates of 0.3% and 3.5%, respectively.

But shelter prices rose by 0.4% for a fourth consecutive month, showing no signs of slowing.

The Federal Open Market Committee on Wednesday voted to maintain the target range for its federal funds rate at 5.25% to 5.5%. A rate cut could theoretically come in July, but analysts aren’t betting on it.

“My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing, and transportation,” Fed Chair Jerome Powell said.

He called housing inflation “complicated” and said it could take several years to normalize.

“The best thing we can do for the housing market is to bring inflation down so that we can bring rates down so that the housing market can continue to normalize,” he added.

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