Home-sale prices in the U.S. rose in recent weeks due to the shortage of available homes on the market. However, some relief may be on the horizon as experts project that cooling consumer prices could bring mortgage rates down.
According to a recent report from Redfin, median U.S. home-sale prices climbed 1.5% over the four weeks ending July 9 compared with a year earlier. That’s the first increase in nearly five months, according to the data from the technology-powered real estate brokerage.
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New listings are down 27% year over year, which is the biggest drop since the start of the pandemic. Overall, the total number of homes on the market is down 14%, which represents the biggest decline in over a year, according to Redfin.
It’s unsurprising given the fact that most homeowners have a borrowing rate below 6% and don’t want to give up their relatively lower mortgage, according to the brokerage.
However, in June, inflation dropped to its lowest level since early 2021, offering much-needed relief to cash-strapped Americans and offering “a glimmer of hope for the housing market,” Redfin said. Prices cooled more than expected, rising just 3% on an annual basis, the Labor Department said Wednesday.
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“This month’s inflation report is likely to bring mortgage rates down a bit from their recent highs. It shows that the Fed’s interest-rate hikes are working and increases the chance they’ll only hike rates one more time this year,” said Redfin economic research lead Chen Zhao.
Zhao said the elevated mortgage rates are responsible for the high monthly housing payments and low inventory.
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“Any decline is welcome news for buyers,” Zhao added. Still, even if rates come down slightly, “they’ll likely remain well above 6% until the Fed sees several more months of inflation readings closer to their target,” Zhao warned.
Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year fixed mortgage climbed to 6.96% from 6.81% a week ago. A year ago, the rate averaged 5.51%.