A luxury home and a percentage sign.
Illustration by Lanette Behiry/Real Estate News

Mortgage rate dip leads to jump in activity 

Rates fell slightly this week, ending a four-week run of increases, and mortgage applications were up nearly 10%. Inventory and consumer sentiment are also up.

March 7, 2024
3 minutes

Key points:

  • The average 30-year fixed-rate mortgage rate fell to 6.88%, the first decline in a month.
  • Even as rates remain elevated, more sellers are putting homes on the market, increasing inventory across the U.S.
  • The Federal Reserve is reluctant to cut rates until they have more confidence inflation is getting closer to the 2% target rate.

Homebuyers appear to be paying very close attention to the direction of mortgage rates heading into the spring shopping season.

The 30-year fixed-rate mortgage fell slightly this week from 6.94% to 6.88%, according to the latest survey from Freddie Mac. It's the first drop in a month, prompting a 9.7% rise in mortgage applications, according to the Mortgage Bankers Association.

Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market, said Sam Khater, Freddie Mac's chief economist, but for those who can afford to buy, their options are increasing. 

More sellers appear to be letting go of their ultra-low fixed rates and putting homes on the market. According to a Bright MLS analysis of Altos Research data, new listings are up in 70% of the nation's metro areas.

After holding out for lower rates, It may be that potential home sellers can no longer wait due to life circumstances like marriage, divorce or a growing family, said Lisa Sturtevant, chief economist for Bright MLS.

"Conventional wisdom was that mortgage rates had to come down significantly in order to entice homeowners to sell. However, like with so much about the current housing market, conventional wisdom has not been exactly on target," Sturtevant said.

The latest Home Purchase Sentiment Index also points to a trend of more sellers putting homes on the market. The survey found that 65% of consumers believe it's a good time to sell a home, up from 60% in January.

Overall consumer sentiment about home buying and selling is higher than it was this time a year ago, said Doug Duncan, Fannie Mae's chief economist. He added that the rising sentiment "may foreshadow an upcoming increase in existing home listings."

Rates cuts still coming — eventually 

Sellers may also be realizing that mortgage rates aren't coming down as quickly as they'd hoped. In a statement to policymakers on March 6, Federal Reserve Chair Jerome Powell reiterated his stance that the board is not ready to start cutting rates, as it wants to "gain greater confidence" that inflation is moving closer toward the 2% range before it acts. 

For now, the economic data continues to point toward a hot economy, leaving many to speculate that rate cuts won't start until this summer at the earliest. Powell says he does still expect to implement cuts later this year.

Less competition for buyers, if they can handle higher rates

Redfin's latest market report shows four-week new listings up 12.8% year-over-year, the biggest increase since June 2021.

This rise in inventory is good news for buyers who can afford today's mortgage rates, said Chen Zhao, Redfin's economic research lead, as they "may have better luck finding a home now than they have in the past several months, and they also may be less likely to face competition because inventory is improving."

This week's bump in mortgage applications came largely from purchase applications, particularly for FHA loans, said Mike Fratantoni, MBA's chief economist.

The uptick shows "how sensitive the first-time homebuyer segment is to relatively small changes in the directions of rates," Fratantoni noted.

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