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Mortgage Rates Drop Below 7%: Spring Homebuyers Get an Unexpected Boost
Mortgage Rates Drop Below 7%: Spring Homebuyers Get an Unexpected Boost San Francisco
By   Internet
  • City News
  • Mortgage rates
  • US housing prices
  • existing home sales
  • housing inventory
Abstract: According to the latest data from Freddie Mac, the average rate for a 30-year fixed mortgage in the US has dropped below 7% for the first time, falling from 7.02% last week to 6.94% for the week ending May 23.

Freddie Mac's Chief Economist, Sam Khater, stated in a release: "Spring homebuyers received an unexpected boost this week as mortgage rates fell below the 7% threshold for the first time in over a month."


Over the past five weeks, mortgage rates had remained above 7%, so this drop may provide some uplift to an otherwise sluggish spring real estate market. In addition to lower rates, buyers can also benefit from a continuous increase in housing inventory, which has risen for 28 consecutive weeks as of May 18. Realtor.com® data scientist Sabrina Speianu highlighted that "inventory of homes for sale increased by 35.5% compared to the same week last year, marking the highest level since the early days of the COVID-19 pandemic in July 2020."


Speianu explained: "The decline in rates following the release of the April Consumer Price Index data indicates that inflation, which had been accelerating since January 2024, is beginning to ease. Recent job market and inflation data suggest that conditions are moving in the right direction, though the path to lower rates may encounter unexpected hurdles."


Overall, the trend for rates might be downward. Realtor.com economist Jiayi Xu stated: "The progress observed in April's inflation and labor market data could provide some stability to mortgage rates, possibly leading to further declines. With mortgage rates no longer climbing, both buyers and sellers eagerly anticipate lower rates to reignite the housing market."


Not only has the total number of homes for sale reached a four-year high, but new listings also increased by 8.1% compared to last year. Speianu noted: "Seller activity continued to rise year-over-year last week, with the pace of growth accelerating compared to the previous week."


Mortgage Rates Drop Below 7%: Spring Homebuyers Get an Unexpected Boost

realtor.com


New home listings last week increased by 6.6% compared to the previous year. This growth indicates that sellers might finally be willing to put their properties on the market. Speianu mentioned: "Earlier in May, we saw sellers—many of whom are also buyers—cautiously withdraw from listing their homes due to rising mortgage rates and slower growth in new listings. However, mortgage rates have dropped again after several weeks of increases. In response to this drop, with the acceleration in new listings, more sellers are choosing to list their homes."


Buyers looking for more options should focus on the South, where inventory in April grew by 43.0% year-over-year. Speianu added: "The Southern market is also driving inventory affordability, with more small and affordable homes being listed in that region."


As of the week ending May 18, the national median home price increased slightly by 0.6% year-over-year. In April, the median-priced home sold for $430,000. This modest increase follows 11 consecutive weeks of zero or negative year-over-year price growth. Speianu explained: "In recent months, with more affordable homes for sale compared to the previous year, the growth in listing prices has remained moderate."


During the week ending May 18, homes stayed on the market for one more day than they did a year ago. In April, a typical home was on the market for 47 days. Speianu noted: "Recent increases in mortgage rates have made buyers and sellers more cautious, with home prices resembling those of last year over the past three months."


Despite the slowdown in home sales, buyers should note that the pace remains faster than pre-pandemic levels, as inventory has yet to return to "normal levels." Speianu concluded: "Although housing inventory has increased compared to last year, it remains below pre-pandemic levels, continuing to support listing prices."


In summary, the drop in mortgage rates below 7% provides a significant opportunity for spring homebuyers, potentially revitalizing a sluggish market. The increase in housing inventory and new listings also offers more options for buyers, particularly in the South. However, cautious behavior from both buyers and sellers due to recent mortgage rate fluctuations and moderate price growth indicates a market still adjusting to post-pandemic conditions.

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Mortgage Rates Drop Below 7%: Spring Homebuyers Get an Unexpected Boost
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