Mortgage rates increased slightly last week but remain in the mid-6s, encouraging some potential buyers to come off the sidelines.
Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage averaged 6.66%, up from the week prior’s 6.62%. A year ago at this time, the 30-year FRM averaged 6.33%.
This is the second consecutive week of increases, but just the second since October. Rates have fallen more than a full percentage point since then, giving homebuyers more breathing room as they struggle against record-high unaffordability.
The 15-year fixed rate bucked this trend and fell for a second week, from 5.89% to 5.87%. A year ago, it averaged 5.52%.
Freddie Mac Chief Economist Sam Khater noted that even as rates have ticked up, they haven’t “moved materially over the last three weeks and remain in the mid-six percent range, which has marginally increased homebuyer demand.”
“Even this slight uptick in demand, combined with inventory that remains tight, continues to cause prices to rise faster than incomes, meaning affordability remains a major headwind for buyers. Potential homebuyers should look closely at existing state and local resources, such as down payment assistance programs, which can considerably help defray closing costs.”
Nearly 90% of homeowners have a rate below 6%, incentivizing them to stay in their homes for longer and extending the existing home shortage.
Buyers seeking affordable homes are faced with competition that keeps prices elevated, pushing homeownership out of reach for many despite cooling rates.
Inventory is expected to improve in 2024, however, due to both ongoing demand for new construction and typical life changes for homeowners. Marriage, divorce, or new jobs will naturally force some families to sell.
As Redfin recently noted: “For most people, it’s not realistic to stay put forever.”
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