Falling rates and rising inventory a good combo for buyers
Rates edged closer to the 7% mark this week, improving affordability. Coupled with a small bump in listings, that could mean more year-end sales.
- The 30-year fixed-rate mortgage dropped for the fifth straight week, landing at 7.29%.
- Despite mixed messages from the Fed, overall investor sentiment points to no additional rate hikes this year.
- Inventory and mortgage applications are rising at a time of year when both usually trend down.
Mortgage interest rates fell for the fifth consecutive week, edging closer to the 7% level many potential homebuyers are waiting for.
The 30-year fixed-rate mortgage landed at 7.22% this week, according to the latest Freddie Mac Survey. That's down from 7.29% last week and a drop of 50 basis points in just one month. The 15-year fixed rate also continued to fall, hitting 6.56% this week.
Daily averages came in even lower, with Mortgage News Daily reporting a rate of 7.15% for Nov. 30.
"The current trajectory of rates is an encouraging development for potential homebuyers," said Sam Khater, Freddie Mac's chief economist. "The modest uptick in demand over the last month signals that there will likely be more competition in a market that remains starved for inventory."
The continued decline in rates reflects shifting market sentiment, said Khater. Some Federal Reserve policymakers are also expressing confidence that no more interest rate hikes are needed to curb inflation.
"Despite the mixed messages from the Fed, many investors are inclined to believe that the Federal Reserve has concluded its interest rate hike cycle," said Realtor.com Economist Jiayi Xu.
One thing that could derail this investor optimism is next week's employment reports. If hiring and wages show a big jump, the Fed might feel that more hikes are warranted.
An uptick in home sales for the holidays?
While still elevated, declining interest rates are lowering borrowing costs, improving affordability for potential buyers. This could lead to a holiday bump in home sales, although low inventory will keep sales in check.
"Typically, the period between Thanksgiving and New Year's Day is a notoriously slow time for the housing market, said Lisa Sturtevant, chief economist for Bright MLS. "This year, however, buyers who have been on the sidelines may jump opportunistically on lower rates in order to buy before year's end."
Applications and listings rise
As rates fall, purchase mortgage applications have continued to climb, rising 5% compared to a week before according to the Mortgage Bankers Association. Even with the recent rebound, purchase applications are still down around 20% year-over-year, said Joel Kan, MBA's deputy chief economist.
New listings are also on the rise. In its weekly report, Redfin noted that listings were up 5.8% compared to a year ago, the biggest annual increase in two years. That's partly because a year ago listings were falling, which is typical for the holiday season. But an increasing number of listings during a time when inventory usually dries up could present some opportunities, said Redfin Economics Research Lead Chen Zhao.
"Housing costs are at their lowest level in three months, and it's unlikely they will drop significantly anytime soon. That makes it a relatively good time to lock in a rate," Zhao said.