Mortgage rates ticked down slightly this week, a tiny boon to buyers eager to make a move with newly listed homes coming to market.
The 30-year fixed-rate mortgage averaged 6.88% in the week ending March 7, down from 6.94% the previous week, according to data from Freddie Mac released Thursday. A year ago, the average 30-year fixed-rate was 6.73%.
“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” said Sam Khater, Freddie Mac’s chief economist, said in a statement.
Thursday’s decline caps a four-week streak of rising rates and will likely draw even more people to the spring market.
Applications for mortgages were up 9.7% in the week ending March 1 from the week before, according to the Mortgage Bankers Association.
Applications for a loan to purchase a home were up 11% from a week earlier, while refinance applications rose 8% from a week earlier, on a seasonally adjusted basis — although both were below levels reached a year ago.
Also, applications for Federal Housing Administration loans were up last week, demonstrating an interest from first-time homebuyers, according to the MBA report.
Still, with homebuyers struggling in one of the least affordable markets in decades, mortgage rates are one of the biggest — and most persistent — hurdles for potential homebuyers, he said, in addition to stubbornly low inventory.
“It’s important to remember that rates can vary widely between mortgage lenders, so shopping around is essential,” Khater added.
More inventory is coming to market
More homes are coming to market, as is typical during the spring homebuying and selling season.
New listings of homes for sale rose 13% year over year during the four weeks ending February 25, marking the biggest increase in nearly three years, according to Redfin.
Total inventory is also improving. While active listings are flat from a year ago, February’s report from Redfin was notable because it marked the first time in nine months the total number of homes for sale hadn’t declined.
On the buyers’ side, the increase in mortgage applications without much of a decrease in mortgage rates suggests that people looking for a home are currently more concerned about having more homes to choose from than they are about the financing costs.
On the sellers’ side, the increase in new listings suggests that at least some homeowners can no longer wait for mortgage rates to fall in order to sell their home and become buyers themselves.
New listings are up in 70% of the country’s metro areas, according to Bright MLS.
“Conventional wisdom was that mortgage rates had to come down significantly in order to entice homeowners to sell,” said Lisa Sturtevant, chief economist at Bright MLS, in a statement. “However, like with so much about the current housing market, conventional wisdom has not been exactly on target.”
Sturtevant said many current home sales are being driven by people’s individual life changes like a marriage or a divorce, a new baby, or a need to be closer to aging parents.
“People may have been putting off moving, hoping they would be able to sell when interest rates were lower, but those life circumstances have begun to outweigh the financial considerations for some,” she said.
While mortgage rates are expected to fall further in 2024, Sturtevant added, short-term movements in mortgage rates will likely be influenced by congressional testimony given this week by Federal Reserve Chair Jerome Powell. During his semiannual monetary report to Congress, he indicated there is no rush to cut interest rates with more evidence of cooling inflation. The February jobs report, which will be released Friday, is also likely to have some bearing on mortgage rates. If the job numbers are quite strong, it will suggest that the economy is still growing at a healthy pace. That means the Fed is likely to push out its timeline for rate cuts.
