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Mortgage rates fall below 7% for the first time in more than a month
The average 30-year fixed mortgage rate fell below 7% for the first time since early April, reaching 6.94% from 7.02% the previous week, according to Freddie Mac. Rates fell for the third week in a row, but have hovered around 7% for more than a month.
A separate measure that tracks daily rate movement has fluctuated between 7% and 7.20% over the past seven days, settling at 7.17% on Thursday, according to Mortgage News Daily.
The spring home buying season is usually the most active time for the housing market, but it has been slow this year. High mortgage rates, high home prices and low inventory are challenging homebuyers. Sales of older homes fell in April as supply remained tight.
“It’s very difficult to have incredible volume when rates are high and inventory is relatively low by historical measures,” Corey Burr, founder of The Burr Group, a real estate agency in Washington D.C., told Yahoo Finance.
See more information: Mortgage Rates Today, May 23, 2024: 30-Year Rates Are Finally Below 7%
Home buyers remain on the sidelines
Despite pent-up demand for homes, buyers are hesitant to enter the market even after this week’s rate drop. According to the Mortgage Bankers Association (MBA), the volume of mortgage purchase applications fell 1% this week compared to last.
Mortgage applications are 11% lower than the same week a year ago. refinancing activity, however, it jumped 7% weekly and 21% year-over-year.
“Buying activity continues to lag despite the recent decline in rates…as potential buyers still face limited inventory for sale and high list prices,” said Joel Kan, MBA’s deputy chief economist.
At the current average rate, a homebuyer would pay nearly $1,600 monthly for a $300,000 home with a 20% down payment, according to the Yahoo Finance Mortgage Calculator.
See more information: Mortgage Rates Drop Below 7% – Is This a Good Time to Buy a Home?
Mortgage purchase application volume fell 1% this week. (ASSOCIATED PRESS)
Drop in sales of existing homes
Sales of existing homes fell 1.9% month over month in April, according to the National Association of Realtors (NAR)during what is typically the busiest season.
Low stock is to blame. The total housing stock at the end of April was 1.21 million units, according to NAR. Despite increasing 9% per month and 16% per year, the offer is only 3.5 months. A six-month supply is considered a balanced market. By comparison, pre-COVID months had about 1.9 million homes for sale.
“We are on new ground, in new territory as to how the effect or impact of lock-in will constrain home sales,” said Lawrence Yun, chief economist at NAR.
The story continues
“We have never seen such a thing,” Yun said, referring to the 3% increase in rates over the past two years.
Inventory pressure has caused home prices to reach a new high. The median price of existing homes rose nearly 6% to $407,600 in April from $385,800 a year ago.
Home prices in all four US regions rose. The West saw the biggest jump, more than 9% year over year, followed by more than 8% in the Northeast, 6% in the Midwest and 4% in the South.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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