What's in this article?
Welcome to the next issue of Homefinity’s newsletter, featuring all you need to know about mortgage rates and the real estate market across America.
We put together a concise, up-to-date summary of the most important news in mortgage rates and home buying that can help you find the right mortgage solutions.
Let’s dive right in.
Mortgage rate trends this week
For two consecutive weeks, mortgage rates have experienced a slight increase. The average 30-year fixed rate rose from 6.39% last week to 6.43%. In comparison, the rate was 5.10% a year ago.
This week, the average interest rate for a 15-year mortgage decreased slightly to 5.71%, compared to last week’s 5.76% average. However, this is still higher than the 4.40% rate seen a year ago.
Despite this rise, potential homebuyers are continuing to anticipate lower rates and possibly reduced prices in the near future.
Why? Many positive indicators—like Freddie Mac’s chief economist, Sam Khater, predict that rates will gradually decrease throughout 2023 as inflation slows down.
This expected drop in mortgage rates for the rest of the year is good news for those planning to buy a home.
However, sellers who have not yet listed their properties must determine how to differentiate themselves in an increasingly competitive market.
Mortgage demand still increasing
The Mortgage Bankers Association (MBA) reports that mortgage demand increased by 2.9% from the previous week.
Joel Kan, the Vice President, and Deputy Chief Economist at MBA, explains that home-price growth has significantly decelerated in various regions, enhancing the purchasing power of potential buyers.
Refinancing activity also increased up by 5%—though it remains 61% lower compared to the same week a year ago.
Most American homeowners are still enjoying rates significantly lower than current levels, explained Kan, “leaving only a small pool of borrowers with [any] incentive to refinance.”
New house listings showing big drop
In April, new house listings experienced a significant drop of 22.4%, one of the largest reductions since the pandemic began in 2020, as per a recent Redfin study.
The over 20% decrease in home listings during the four weeks ending April 23, in comparison to the previous year, highlights homeowners’ reluctance to relinquish their pre-interest rate hike mortgage rates.
This lack of available homes is also leading to properties being sold rapidly. Almost 50% of all homes on the market are being sold within a fortnight, which is the quickest pace in nearly a year, even as increased mortgage rates deter some potential buyers.
The shortage of homes is also preventing a further decline in property prices; for example, the median sale price in the U.S. fell by 2.8% year over year, consistent with the price drops observed in the past month.
The key to keeping mortgage payments at manageable levels
According to Nadia Evangelou, a senior economist at the National Association of Realtors (NAR), to avoid a monthly mortgage payment exceeding 25% of their income, Americans must make a 20% down payment on a median-priced home at the current rate.
Evangelou also echoed Freddie Mac’s prediction that mortgage rates will fall to 5.8% by the end of this year.
What is, statistically, the best time to sell?
Danielle Hale, the chief economist at Realtor.com, indicated that the optimal time for selling homes has already gone by, as a Realtor.com study identified the week of April 16-22 as the best period for selling this year.
Consequently, sellers who list their homes later might need to price them competitively in order to attract buyers amidst the typically increasing number of sellers.
Halle also said she believes that if the current economic climate continues—characterized by high mortgage rates and home prices coupled with limited inventory—the housing market may experience a slow, gradual recovery with some challenges along the way.