Little movement in mortgage rates signals a slow summer
Rates dipped only slightly this week in Freddie Mac's survey, inching down from 6.69% to 6.67%.
- With the Federal Reserve leaving the door open to more rate hikes in the second half of the year, mortgage rates are expected to remain in 6%-6.5% range.
- The slowdown may be just what the real estate market needs to return to normalcy after the recent "unicorn years."
There was very little movement in mortgage interest rates this week, which may be the theme of the summer.
The 30-year fixed rate mortgage averaged 6.67% this week, according to the latest Freddie Mac survey. That's down slightly from 6.69% last week and 6.71% the week before. The 15-year fixed-rate mortgage dropped more significantly from 6.10% to 6.03%.
Applications for mortgage loans have also remained fairly flat, according to the Mortgage Bankers Association. Applications were up less than 1% compared to the week before, but down 32% compared to a year ago.
This pattern of slightly declining but still elevated mortgage rates could remain in place for much of the summer as the Federal Reserve continues to try and knock down inflation from its current rate of 4% to the target rate of 2%. With more interest rate hikes expected, it's likely that mortgage rates will remain upward of 6% through the rest of the year, said Realtor.com economist Jiayi Xu.
"As a result, affordability will continue to be an important factor in buyers' home purchasing decisions," Xu said.
The Fed's monetary policy has not slowed home price appreciation enough to compensate for the rapid rise in prices during the first two years of the pandemic. As a result, affordability is going to be an even bigger issue going forward, said Bright MLS chief economist Lisa Sturtevant.
"Easing price growth in the housing sector will take policies that encourage increased supply," Sturtevant said, adding that she expects mortgage rates to hover between 6%-6.5% at the end of the year.
"This summer's housing market shows signs of normalizing in the wake of an unprecedented period," said George Ratiu, chief economist at Keeping Current Matters. He referred to the 2020-2022 period as "unicorn years" of skyrocketing sales and home prices, a scenario that's unlikely to repeat itself anytime soon.
"Any comparison to those years may cast a shadow over the current market," Ratiu said. "At the same time, a return toward historical trends is a welcome move in the right direction."