Mortgage rates dropped slightly following the Federal Reserve’s May interest rate meeting, according to Freddie Mac.
The average rate for a 30-year fixed-rate mortgage dropped to 6.29% for the week ending May 4, according to Freddie Mac’s Primary Mortgage Market Survey. That’s down from the previous week when it averaged 6.43%. Mortgage rates, however, are still above last year when the average was 5.27%.
The average rate for a 15-year mortgage was 5.76%, up from 5.71% the week before and up from 4.52% last year.
On Wednesday, the Fed raised rates by another 25 basis points, indicating that it might be the last hike of the year. While a rate cut isn’t yet in the cards, economists hope the central bank may begin reversing course in early 2024.
The interest rate outlook should bode favorably for homebuyers, but they’ll have other challenges to overcome, according to Freddie Mac Chief Economist Sam Khater.
“This week, mortgage rates inched down slightly amid recent volatility in the banking sector and commentary from the Federal Reserve on its policy outlook,” Khater said. “Spring is typically the busiest season for the residential housing market, and, despite rates hovering in the mid-six percent range, this year is no different.
“Interested homebuyers are acclimating to the current rate environment, but the lack of inventory remains a primary obstacle to affordability,” Khater continued.
If you are looking to take advantage of lower mortgage rates by refinancing your mortgage loan, or are ready to shop for the best rate on a loan, consider visiting an online marketplace like Credible to compare rates, choose your loan term, and get preapproved with multiple lenders at once.
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The lack of sellers is creating a housing inventory crunch. Homes for sale in April were 50.5% lower than they were in 2019, before the pandemic, according to Realtor.com’s monthly housing trends report.
Sellers cited concerns over buying a new home in a higher rate environment, the ability to get a good offer, and increased costs to get a house ready to sell as the top reasons they hesitated to put their homes up for sale, according to a recent Realtor.com site survey.
“A lack of new sellers and homes for sale continues to limit buyers’ choices and home sales,” Realtor.com chief economist Danielle Hale said in a statement. “Many sellers are likely future buyers too, which may be why a majority of would-be sellers report feeling ‘locked in’ to their current home because of a low mortgage rate, especially younger homeowners.
“But older seller-buyers, who are likely to have a smaller mortgage balance and built up greater equity, are less likely to report feeling locked in by a low-interest rate and are more likely to report that they need to sell anyway, Hale continued. “This likely means that older households will continue to play a prominent role on both sides of the home sale transaction this year.”
If you want to take advantage of interest rates before they potentially go up, you could consider shopping for the right mortgage or refinance your existing one. You can visit Credible to speak with a mortgage expert and get your questions answered.
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Homebuyers will also have to contend with rising home prices this spring. Home prices nationwide increased annually by 3.1% in March 2023, according to the latest CoreLogic home price index report.
On a monthly basis, March home prices increased 1.6% from February. CoreLogic is forecasting that home values will rise another 0.8% in April.
“While housing markets across the country continue to send mixed signals, prices in many large metros appeared to have turned the corner, with the U.S. recording a second month of consecutive monthly gains,” CoreLogic Chief Economist Selma Hepp said in a statement. “At 1.6%, the month-over-month increase was twice the average seen between 2015 and 2020.
“The monthly rebound in home prices underscores the lack of inventory in this housing cycle,” Hepp continued. “In addition, while the lack of affordability generally weighs on home price growth, mobility resulting from remote working conditions appears to be a current driver of home prices in some areas of the country.”
Homebuyers may find a better mortgage rate by looking at several lenders. If you are ready to shop for a mortgage loan, visit Credible to help you compare interest rates from multiple mortgage lenders and choose the one with the best rate for you.
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