A house against a background of financial charts
Illustration by Lanette Behiry/Real Estate News; Shutterstock

Mortgage rates ease, but buyers still aren't getting a break 

After five weeks of increases, rates pulled back slightly, but rising home prices and record-high mortgage payments continue to hamper affordability.

May 9, 2024
4 minutes

Key points:

  • Rates fell to 7.09% this week but have remained above the 7% mark for the past month.
  • Buyers are still paying more: Average mortgage payments hit record highs.
  • Even as mortgage rates remained elevated, prices rose in more than 90% of metro areas, pushing the national median price to $389,400.

Mortgage rates eased for the first time since March, but waiting for lower rates isn't paying off yet for buyers, according to new economic data released Thursday.

With rates staying above 7% — and home price growth accelerating — average monthly mortgage payments have maintained an unrelenting march upward.

Mortgage rates dip, applications rise

The average 30-year fixed-rate mortgage fell to 7.09%, down from 7.22% last week, according to Freddie Mac. It's an incremental change but a welcome break in the upward trajectory for homebuyers who had seen rates rise steadily since the end of March.

Meanwhile, mortgage applications rose for the week ending May 3, up 2.6% from the previous week, according to the Mortgage Bankers Association.

But those buyers reentering the market after waiting for rates to drop aren't likely to see their money going any further, as home prices and average monthly payments continue to hit record highs. 

"Despite the welcome drop in rates, the current mortgage rate environment still leaves prospective homebuyers with a conundrum," said Bright MLS Chief Economist Dr. Lisa Sturtevant.

"Inventory has been on the rise as we are in the height of the spring market. The fact that there are more choices for buyers is a good thing, but so far, the additional supply has not put downward pressure on home prices. With rates still above 7%, homebuyers are weighing the decision about buying now — as fresh new listings are coming onto the market — or holding off until later this year when rates should be lower." 

Prices rising almost everywhere

More than 90% of metro areas saw existing single-family home prices rise in the first quarter of the year, according to data released May 8 by the National Association of Realtors.

Prices rose in 93% of metro areas, up from 86% in the prior quarter. Of the 221 metro areas tracked in the NAR report, 30% saw double-digit price gains during the quarter, up from 15% in the final quarter of 2023.

Annual price gains varied by region: 3.3% in the South, 3.1% in the Northeast, 7.4% in the Midwest and 7.3% in the West.

"The expensive markets in the West, where home prices declined last year, are roaring back," NAR Chief Economist Lawrence Yun said. "Price dips in that region were viewed as second-chance opportunities by many buyers."

Prices declined in just 7% of the surveyed markets, down from 14% in the final quarter of 2023.

Nationally, the median existing-home price was up 5% year-over-year to $389,400, an accelerated pace compared to the prior quarter's 3.4% increase.

"Astonishingly, greater than 90% of the country's metro areas experienced home price growth despite facing the highest mortgage rates in two decades," said Yun. "In the current market, rising prices are the direct result of insufficient housing supply not meeting the full demand."

Mortgage payments taking an ever-higher bite out of paychecks

The median monthly mortgage payment hit a record high of $2,894 during the four weeks ending May 5. That's up a whopping 14% year-over-year, according to Redfin.

Home prices were also up 4.5% from the same period last year, according to the report.

Supply took a hit in April as would-be sellers got cold feet in the face of rising mortgage rates, holding on to their existing low rates.

All of that added up to a 3% drop in pending home sales from the previous year, the biggest reduction in two months, according to the Redfin Report.

For buyers who are able to enter the market, there is some good news. At a time when competition for homes is normally gaining momentum, there's little sign of that so far this spring. Redfin reported that while 30% of homes sold above asking price, that's unchanged from the previous week and down slightly from 32% a year earlier.

And price drops also hit 6.2%, the highest share since November.

Overall, the data confirm that the housing market will remain at the mercy of mortgage rates and supply. Easing rates will lure both buyers and sellers back to the market, but for now, it appears that buyers will simply be passing on any savings in interest to sellers in the form of higher prices.

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