Mortgage rates continue to move lower this week even as higher borrowing costs have kept activity subdued across many areas of the housing market.
According to data at HousingWire’s Mortgage Rates Center, the average rate for 30-year conforming loans was at 7.01% on Tuesday, down 5 basis points from one week ago and 10 basis points lower than two weeks ago. The rate for 15-year conforming loans averaged 6.66% on Tuesday, compared to 6.79% a week ago.
HousingWire Lead Analyst Logan Mohtashami recently wrote that higher mortgage rates “have increased recession risk by targeting the one sector that always falls before every recession: residential construction workers. And higher rates are also impacting the future supply of homes, as housing permits have been in a downtrend for a while.“
Data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) showed that housing starts shrank 4.4% year over year in June. But this pullback was led by the multifamily sector, where starts dropped 23.4% compared to June 2023. Single-family starts rose 4.4% during the year. Permits fell by 3.1% year over year, including a 1.3% decrease in single-family permits.
Housing completions also grew by 15.5% during the year, although the bulk of this was tied to multifamily (40.2% growth). There were a record number of apartments delivered in many markets last year, but builders appear to be pulling back to avoid a glut of supply.
Lower mortgage rates are having a positive impact on application levels, with the Mortgage Bankers Association (MBA) reporting last week that applications were up 3.9% on a yearly basis during the week of July 12. Most of this growth was tied to refinance applications, which were up 37% year over year.
Fannie Mae economists project two rate cuts by the end of 2024. In a report released Tuesday, the government-sponsored enterprise anticipated the Federal Reserve would cut benchmark rates in September and December, resulting in the average 30-year rate declining to 6.8% in 2024 and to 6.4% in 2025.
Fannie also upwardly revised its forecast for purchase mortgage origination volume to $1.22 trillion due to home price appreciation that is expected to finish 2024 higher than previously anticipated. Fannie reduced its forecast for refinance originations to $346 billion this year but expects $563 billion in refis next year. In total, Fannie is forecasting $2.11 trillion in origination volume in 2025, up from a projected $1.70 trillion this year.
Survey data released Tuesday by Bright MLS concluded that “affordability is increasingly becoming more of a challenge for potential homebuyers.“ The survey of 1,180 real estate agents across six Mid-Atlantic states and the District of Columbia found that 14% of sellers in June saw a contract fall through due to a buyer’s inability to secure financing, which was up from 11% in May.
The surveyed agents also noted that affordability was the No. 1 reason for a buyer pausing their home search efforts over the past six months, while high mortgage rates were the No. 2 reason. Each of these factors were cited by nearly 60% of respondents.
“With mortgage rates hovering around 7% and home prices continuing to rise, financing is a growing challenge for buyers, and this is beginning to impact a buyer’s ability to make it across the finish line,” Bright MLS chief economist Lisa Sturtevant said in a statement.
Good news, however, came in the form of less competition. In June, 38% of buyers successfully completed a purchase through Bright MLS while submitting only a single offer. That was up from 31.2% one year ago.
Favorable economic trends are helping mortgage rates continue the downward trend they’ve been on for the past few months.
HousingWire‘s Mortgage Rates Center showed that the average 30-year conforming loan rate was 7.06% on Tuesday, down from 7.11% a week earlier. The 15-year conforming loan rate showed an even larger pullback, declining from 6.90% to 6.79% during the week.
That data comes on the heels of cooling inflation numbers. Last week, the Consumer Price Index (CPI) showed that prices for goods and services declined by 0.1% from May to June. They rose 3% on an annualized basis, the slowest rate of growth in more than three years.
More good news for the housing and mortgage industries arrived Monday through remarks delivered by Federal Reserve Chair Jerome Powell. At an event in Washington, D.C., Powell indicated that policymakers would not wait for inflation to reach 2% before making cuts to benchmark rates. The federal funds rate has been in a target range of 5.25% to 5.5% since July 2023.
“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said, according to reporting by CNBC.
According to the CME Group‘s FedWatch tool, analysts believe there is a 93% chance that rates will remain unchanged after the Fed’s meeting at the end of July. But 100% of analysts have penciled in a cut in September.
HousingWire Lead Analyst Logan Mohtashami believes that mortgage rates could fall to 6% if the 10-year Treasury yield continues to recede. The spread between the 10-year yield and the 30-year rate narrowed to 2.62% last week, down from a recent peak of 3.1% in June 2023.
Mohtashami said that mortgage rates would be 0.48% higher today if the highest levels of spreads from last year were incorporated today. The shrinking spreads are correlating with a rise in purchase mortgage applications.
“The last time we saw 12 weeks of positive trending purchase app growth was when mortgage rates reached 6%,“ Mohtashami wrote Saturday. “Purchase apps have been positive for four out of the last five weeks and mortgage rates aren’t even near 6%. Now, context is critical because we are working from the lowest bar ever, so it doesn’t take much to move the needle higher with purchase apps, as the last five weeks have shown.“
With mortgage rates stubbornly remaining above 7% for all of 2024, home-price growth has cooled and supply has increased in many areas of the country.
According to data released Tuesday by First American, U.S. home prices grew by 5.6% year over year in June. It marked the sixth straight month that the annualized appreciation rate has slowed.
Anaheim, California, led the way among the metro areas analyzed by First American with 10.2% price growth compared to June 2023. Miami (8.9%), Pittsburgh (6.5%), Las Vegas (6.4%) and San Diego (6.2%) each exceeded the national average rate of appreciation.
“Elevated mortgage rates continue to keep homeowners rate locked-in, while reducing affordability for potential first-time home buyers,” Mark Fleming, chief economist for First American, said in a statement. “The resulting pullback in demand coincided with an uptick in supply, which is cooling price growth. However, housing remains fundamentally undersupplied nationally, which will keep a floor on how low house price appreciation can fall.”
Data from Altos Research shows that the supply of single-family homes for sale shrank slightly last week to 651,000. That figure is up 38.5% year over year but is still 32% below the pre-pandemic figure of July 2019. Altos also noted that the share of listings with a price cut has grown to 38.3%.
“If we get lucky and mortgage rates ease from here on out for the rest of the year, then one place we’ll measure a rebound in demand will be fewer price cuts,“ Mike Simonsen, president of Altos Research, wrote on Monday. “When you list your home, if you don’t get the offers, you cut your price. But when a few more offers are made by newly affordably mortgages for buyers, then this stat will plateau and even tick down.“
Mortgage rates held steady over the past week despite recent signs of relief from the labor market, according to HousingWire’s Mortgage Rates Center. In large part because of the lack of clarity as to when the Federal Reserve will begin cutting the benchmark rate, mortgage rates remained above the 7% level.
The average 30-year rate for conforming loans sat at 7.11% on Tuesday, unchanged from one week ago. At this year’s peak, the same loan type reached 7.57% in April. Meanwhile, the 15-year conforming rate ceased its steep rise and reached 6.93% on Tuesday from 6.99% the previous week.
HousingWire Lead Analyst Logan Mohtashami said that mortgage rates historically move in connection with the 10-year yield, which “had a crazy move higher” two weeks ago but headed lower on Friday after the jobs report.
“Bond yields did fall, and pricing has gotten just a tad better, but it’s nothing of note,” Mohtashami said. “The spreads have kept mortgage rates more stable.”
According to Mohtashami, the spread between the 30-year mortgage rate and the 10-year yield has been an issue since 2022, and conditions worsened following the March 2023 banking crisis. He added, “If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be0.56% higher right now.”
Data from the U.S. Bureau of Labor Statistics released on Friday showed that total nonfarm payroll rose by 206,000 jobs in June, compared to 218,000 jobs in May (which was revised down from 272,000). Economists say it is good news for the Fed to start cutting rates, but there is uncertainty about when it will start.
“We continue to see headlines and data points driving rate movement in the absence of concrete evidence of when the Fed will start the rate-cutting cycle in the face of sticky inflation,” said Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage.
Fed Chairman Jerome Powell has stated that officials expect it will be appropriate to reduce the federal funds rate target range once they have gained greater confidence that inflation is moving sustainably toward the 2% target. And — stop us if you’ve heard this before — they are not there yet.
“Incoming data for the first quarter of this year did not support such greater confidence,” Powell said during the semiannual monetary policy report to the Congress on Tuesday morning. “The most recent inflation readings, however, have shown some modest further progress, and more good data would strengthen our confidence that inflation is moving sustainably toward 2%.”
Besides monetary policy, uncertainties related to the presidential election are also impacting the markets, according to Alvarez.
“There is always a lot of uncertainty surrounding an election, and we saw the recent debate results push rates up more than expected,” Alvarez said. “However, as we continue to see data indicating that inflation and the economy are weakening, rates will start to come down more significantly. Anyone hoping for a straight ride down will be disappointed.”
Mortgage rates rose slightly over the past week, with the U.S. economy continuing to show strength even as home sales remain tepid.
According to HousingWire‘s Mortgage Rates Center, the average 30-year rate for conforming loans stood at 7.11% on Tuesday, up slightly from 7.08% one week ago. Meanwhile, the 15-year conforming rate continued its steep rise and reached 6.99% on Tuesday after having reached a recent low point of 6.56% on June 21.
“The bond market has been very wild the last few days, but the spreads have behaved as well, keeping rates from being higher than they would have been if we had 2023 mortgage spread levels,“ HousingWire Lead Analyst Logan Mohtashami said. “The 15-year loan might not be that appetizing for investors compared to the 30-year loans lately.“
Little is expected to change in the short term as the odds of the Federal Reserve lowering benchmark rates at the end of this month appear low. According to the CME Group‘s FedWatch tool, market observers believe there is a 91.2% chance of rates remaining the same after the next Federal Open Market Committee meeting on July 30-31.
Speaking from a monetary policy conference in Portugal on Tuesday, Fed Chair Jerome Powell held firm on the stance that officials need to see further cooling of inflation and gain clearer understanding of pricing pressures before cutting rates.
“We just want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,“ Powell said, according to reporting from Reuters. “We want to be more confident, and frankly because the U.S. economy is strong … we have the ability to take our time.“
Also on Tuesday, data from the U.S. Bureau of Labor Statistics showed that job openings rose compared to the prior month, although they are down compared to the same time last year. More available jobs in business sectors such as government and durable goods manufacturing offset losses in food services and private education.
Data from Altos Research shows that the spring homebuying season has peaked and listings are expected to recede over the latter half of 2024. Mortgage rates have remained lower due in part to more supply as the 646,000 homes on the market this week was up 39% year over year. But the number of new listings also shrank from the prior week and was only 8% above year-ago levels.
Melissa Cohn, regional vice president for William Raveis Mortgage, noted that the ramp-up to the presidential election is having an impact on mortgage pricing.
“There have been a lot of interesting elections throughout time, but I think that with what’s going on in the world today, this is certainly an election that the markets have to pay close attention to,“ Cohn said in a statement provided to HousingWire. “I think that we have just gotten a very strong wake-up call that it’s time to put the election into the mortgage rate equation.“
Mortgage rates have leveled off in the past week, according to data on HousingWire‘s Mortgage Rates Center. The average 30-year rate for conforming loans sat at 7.08% on Tuesday, unchanged from one week ago, while the 15-year rate rose 1 basis point to 6.63% during the week.
There has been considerable downward movement in rates over the past few months after the 30-year rate peaked at 7.58% in early May. This has been sparked by a recent decline in the 10-year Treasury yield, a narrowing of the spread between the 30-year rate and the 10-year yield, and consistency from the Federal Reserve on the policy front.
HousingWire Lead Analyst Logan Mohtashami indicated that he does not expect much short-term movement in rates. He pointed to recent comments from Fed Governor Michelle Bowman, who does not anticipate any cuts this year to benchmark rates.
Bowman is not the only policymaker who shares this view. Last week, 11 of 19 Fed officials predicted one cut or fewer in 2024, a dramatic change from the 10 of 19 officials who anticipated three cuts in March.
Mohtashami noted that the new-home sales report to be released Wednesday, as well as the Personal Consumption Expenditures (PCE) inflation report that comes out Friday, could influence rates this week.
Last week, Mohtashami wrote that mortgage application data is signaling increased demand. Purchase loan applications, in particular, saw positive growth during consecutive weeks for the first time since mid-March. But applications remain down since the start of the year, Mohtashami noted.
“This suggests that we’re not experiencing real mortgage demand growth at high rates and the fluctuations we see in the data are merely rebounds from low levels,“ he wrote.
Mike Simonsen, president of Altos Research, wrote earlier this week that “higher for longer” mortgage rates have taken a toll on home sales. Altos reported that 67,000 new contracts for single-family home transactions were started during the past week, down 2.7% from the prior week and 3.3% than the same time last year.
“The takeaway from the pending sales data is that any growth in sales volume we might have seen early in the year is gone,“ Simonsen wrote. “This is a function of mortgage rates staying in the 7s. There’s just no incentive for buyers to jump now. Unless and until mortgage rates drop, we’re in this holding pattern.“
But Altos data also shows that a large share of homes (36.9%) include cuts to the original list price, a sign that inventory is rising and sellers are having a more difficult time locating a buyer. Simonsen noted that markets on Florida’s Gulf Coast, as well as pandemic-era boomtowns in the West such as Austin, Phoenix and Denver, have seen price cuts become more common of late.
“You have elements like property taxes and insurance costs that are way up, so you have a lot more sellers,“ Simonsen wrote.
Mortgage rates continued to inch toward the 7% mark following last week’s meeting of Federal Reserve policymakers and new inflation data that showed further cooling of consumer prices.
On Tuesday, HousingWire‘s Mortgage Rates Center showed that the average 30-year rate for conforming loans was 7.08%. That was down 11 basis points from the same time last week and exactly 50 basis points below this year’s peak rate that was recorded in early May.
HousingWire Lead Analyst Logan Mohtashami recently noted that some specific economic signals are working in the favor of lower mortgage rates. These include a decline in the 10-year Treasury yield (which fell from 4.61% on May 29 to 4.24% on June 13) and a narrowing of the spread between the 30-year mortgage rate and the 10-year yield.
“If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be0.52% higher,” Mohtashami wrote on Saturday. “While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.”
Along with the lower costs of borrowing, prospective homebuyers are also being helped by more homes listed for sale. Data from Altos Research shows that for-sale inventory at the national level grew by 1.5% during the week ending June 14 and has reached its 2024 peak of more than 620,000 homes. For context, the inventory level in mid-June 2023 was less than 452,000.
“If mortgage rates keep falling and demand picks up, we will have a much better buffer with active inventory than in 2022 and 2023,” Mohtashami observed. “My rule of thumb has been that inventory should have some weekly prints between 11,000 – 17,000 as long as rates are above 7.25%. We have hit that three times this year; last year was a whopping zero.”
Last week, as expected, the Federal Open Market Committee left benchmark rates unchanged for a seventh straight meeting, holding them steady at a range of 5.25% to 5.5%. That came a day after the Consumer Price Index for May showed that annualized inflation fell to 3.3%, down from 3.4% growth in April. Fed officials have taken a hardline stance that inflation must move closer to their 2% target before short-term interest rates can be trimmed.
The U.S. employment report for May also influenced the Fed’s decision to leave rates unchanged. The national economy added 272,000 jobs last month, beating estimates of 180,000 and far outpacing the revised figure of 160,000 jobs added in April.
Melissa Cohn, a Florida-based regional vice president for William Raveis Mortgage, said in prepared remarks last week that the Fed’s “updated dot plot was more hawkish than we had hoped.“ She noted that in March, 10 of 19 officials indicated a total of three rate cuts this year. Last week, 11 of 19 predicted one cut or fewer.
“We are back to data-watching. There were no huge surprises in the Fed’s comments or dot plot,“ Cohn said. “Expecting one rate cut should be neutral for the markets, and the Fed’s future actions will depend on the markets. Let’s hope that we see the CPI report next month to show further progress on inflation — then we will have a good summer for mortgage rates and the real estate market.”
A Redfin report released last week noted that even as the U.S. median home price reached another record high of $394,000 during the four weeks ending June 9, declining mortgage rates are helping to alleviate monthly mortgage payment burdens. But Redfin also cautioned that if lower rates lead demand to outpace supply, affordability could take a hit.
”Lower rates and higher prices may ultimately cancel each other out when it comes to homebuyers’ monthly payments,” Chen Zhao, Redfin’s economic research lead, said in the report.
New-home purchase mortgage applications rose 1% month over month and 13.8% year over year in May, according to data released Thursday by the Mortgage Bankers Association (MBA).
The data is derived from the trade group’s survey of homebuilders. The MBA also estimated that sales of new single-family homes reached a seasonally adjusted annual rate of 702,000 in May, up from 699,000 in April for the strongest pace since October 2023.
“There continues to be strength in the new home purchase market, as purchase applications increased in May compared to both the prior month and from a year ago,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “With existing-home inventory still lagging in many markets, many homebuyers have turned their interest toward newly built homes.“
This was especially true for the Federal Housing Administration (FHA) lending segment. The FHA share of new-home mortgage applications in May was 26.5%, the highest share since November 2023 (27.1%).
Conventional loans comprised 63.4% of all applications, with U.S. Department of Veterans Affairs (VA) loans accounting for 9.8% and U.S. Department of Agriculture (USDA) loans at 0.3%.
The average loan size last month across all types of new-home applications was $400,150, down from $405,000 in April.
The surge in demand for new homes is accompanied by sagging demand for existing homes. The MBA reported Wednesday that purchase applications for existing homes were down 12% year over year during the week ending June 7.
Small but steady declines in mortgage rates have created more demand for refinances, as the MBA’s refinance index rose 28% year over year for the week ending June 7.
At HousingWire’s Mortgage Rates Center on Thursday, the 30-year average rate for conforming loans stood at 7.15%. That was down 6 basis points from the same time last week and 43 basis points below this year’s peak rate of 7.58% recorded on May 2.
Closed sales of new homes missed estimates in April, with the seasonally adjusted annual rate dropping 7.7% year over year, federal data shows.
HousingWire Lead Analyst Logan Mohtashami wrote last month that new-home sales are “in a slow grind“ after bottoming out in 2022. Builders continue to offer rate buydowns to attract buyers, but these aren’t a universal incentive.
“The smaller builders don’t have this buy down advantage, and thus, we have seen a decline in homebuilder confidence data,“ Mohtashami wrote.
Mortgage rates aren’t budging, and neither is the Federal Reserve… yet.
The Fed’s governing body, the Federal Open Market Committee, is meeting today and tomorrow (June 11-12) to decide whether to make any adjustments to its benchmark interest rate. But experts say the FOMC isn’t likely to break from its holding pattern.
Until inflation cools enough for the Fed to start cutting rates, homebuyers shouldn’t expect mortgage affordability to improve much. However, if inflation continues to decelerate and the Fed is able to make even one rate cut down the road, we may see some modest improvements in mortgage rates by the end of the year, according to Odeta Kushi, deputy chief economist at First American Financial Corporation.
That’s a big “if.”
On Wednesday, we’ll receive an updated Summary of Economic Projections, which could offer clues as to the direction of mortgage rates over the next several months.
“In the SEP, we’ll learn if Fed members still expect to be cutting rates this year or not, and get a sense of where they believe economic growth, unemployment and inflation will be headed for the remainder of 2024 and beyond,” said Keith Gumbinger, vice president of mortgage site HSH.com.
High mortgage rates have made buying a house prohibitively expensive. I spoke with several housing market experts about their expectations for Fed rate cuts and when we might see lower mortgage rates in 2024.
Why is the Fed holding off on rate cuts?
Since progress on inflation has been slow and the labor market remains strong, the Fed has reason to hold off on lowering rates for another month, if not more.
It’s a delicate balancing act. The Fed wants to see unemployment levels increase just enough to bring inflation down, but not so much that we fall into a recession. The Fed also wants to avoid cutting interest rates too soon, only to have inflation rear its head again. By holding interest rates steady, the Fed can continue to assess the overall economy.
“The Fed won’t cut rates until they have good reason to do so,” said Alex Thomas, senior research analyst at John Burns Research and Consulting.
The Fed doesn’t directly set mortgage rates. However, its policy changes, as well as investors’ expectations for future policy changes, influence whether rates on home loans move up or down.
What do inflation and labor market data have to do with interest rates?
The FOMC will be closely monitoring the Consumer Price Index for May, released Wednesday before its meeting concludes. The central bank wants to see inflation move closer to its target annual rate of 2%. The Personal Consumer Expenditures Price Index (the Fed’s preferred measure of inflation) showed prices growing at an annual rate of 2.7% in April.
The other big metric the Fed cares about is employment. Last week’s labor report showed the unemployment rate reaching 4% for the first time since January 2022, with the US adding 272,000 jobs in May, well above investors’ expectations. Another large increase in jobs indicates a still-growing economy, giving the Fed a reason to wait longer before cutting rates.
Economic data, like last week’s labor report and this week’s CPI numbers, may change expectations about the future of rate cuts this year, causing mortgage rates to dip down even before the rate cuts actually happen.
“If the labor data gets weaker, it doesn’t matter what the Fed does; mortgage rates will go lower,” said Logan Mohtashami, lead analyst at HousingWire.
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When will the Fed start lowering interest rates?
The central bank may make its first cut in July, but that will only happen “if the labor market report is weak and inflation comes down significantly,” said Lisa Sturtevant, chief economist at Bright MLS.
A more likely scenario is for the Fed to cut rates in the fall or early winter.
“If the cuts happen, they will happen toward the end of the year,” said Mohtashami. He believes we’ll see only one or two cuts, as opposed to the three cuts previously penciled into the Fed’s outlook.
Another factor to consider is the general election in November.
“Typically, the Fed refrains from making monetary policy decisions too close to a presidential election, to avoid the prescription of influencing the outcome,” said Sturtevant. “If the Fed does not cut rates in July, it is possible there will not be any rate cuts until 2025.”
Where are mortgage rates going this year?
In December of last year, after the Fed indicated it was prepared to lower interest rates in 2024, mortgage rates moved down into the mid-6% range. Some early-year forecasts optimistically called for rates to fall below 6% by the end of 2024.
But then mortgage rates started to climb back up. Since mid-February, the average rate for a 30-year fixed mortgage has held above 7%.
Experts still anticipate that mortgage rates will moderate in the coming months, landing between 6% and 6.5% by the end of the year. But if new economic data shows higher inflation, investors may adjust their forecast for rate cuts, causing Treasury yields and mortgage rates to surge, said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. His baseline forecast calls for rates to fluctuate between 6% and 7% throughout the rest of 2024.
It’s also important to note that the Fed won’t cut rates all at once. Instead, it will be a gradual process over the next few years, meaning it may take a while before we see mortgage rates drop below 6%.
The bottom line? “Rates are going to remain higher than we had been predicting last year,” said Sturtevant.
When will affordability improve for homebuyers?
Today’s unaffordable housing market isn’t due to just high mortgage rates. Homebuyers are also being pinched by elevated home prices, limited housing supply and the pain of high inflation. Unfortunately, there’s no quick fix to all of these problems. But baby steps are better than no steps at all.
“Frustrating for some as it may be, it’s better that conditions continue to align slowly,” said Gumbinger.
For example, a rapid decline in mortgage rates would only spur more homebuying demand. Without the supply to support that demand, lofty home prices could press even higher, according to Gumbinger.
As mortgage rates gradually fall in the coming years, we should see more homeowners come off the sidelines and sell their houses. But most sellers are also buyers, so that won’t repair today’s housing shortage entirely.
Divounguy said the key to long-term affordability lies in boosting residential construction via land-use and zoning reforms. We’ve already witnessed how new construction is proving to be a bright spot in today’s difficult housing market: To lower the barrier-to-entry for homebuyers, many builders are offering sales incentives like discounted prices, closing-cost assistance and mortgage-rate buydowns.
If you don’t live in an area where there’s a lot of new construction (or you’d prefer to purchase an existing home), there are things you can do to make buying a house more accessible:
Build your credit score: Mortgage lenders reward borrowers with excellent credit scores with lower mortgage rates, which can affect your monthly payments. Paying your credit card bill on time and in full, and lowering your credit utilization ratio can help improve your score over time.
Save for a bigger down payment: With a larger down payment, you can take out a smaller mortgage, which will save you interest over the life of your loan. Depending on your timeline for buying a home, consider stowing your money in a high-yield savings account or certificate of deposit to take advantage of higher returns.
Explore first-time homebuyer programs: First-time homebuyer programs can offer assistance with your down payment, closing costs and more. Also consider government-backed loans, such as FHA loans, USDA loans and VA loans, which often have lower credit score and down payment requirements than most conventional loans.
Even after dropping considerably over the past month, mortgage rates remain well above 7% ahead of the next U.S. jobs report and the next meeting of Federal Reserve policymakers.
Mortgage rates were nearly flat on a weekly basis as HousingWire’s Mortgage Rates Center showed that the average 30-year rate for conforming loans was 7.23% on Tuesday, down only 2 basis points from one week ago. Conversely, the 15-year conforming rate rose 17 basis points during the week to reach 6.94% on Tuesday.
One year ago, the 30-year rate averaged 6.88% while the 15-year rate was at 6.07%.
HousingWire lead analyst Logan Mohtashami noted the recent volatility in the 10-year Treasury yield, another factor that impacts mortgage rates. But he added that spreads have improved this year relative to last year.
“If we took the worst levels of the spreads from the previous year and incorporated those today, mortgage rates would be roughly 0.60% higher today,“ Mohtashami wrote on Saturday. “So, as frustrating as the spreads can be, they are much better than last year. If the spreads return to normal, we could see a 0.75% to 1% improvement in mortgage rates just from that — without the 10-year yield moving lower.“
The U.S. Bureau of Labor Statistics (BLS) will release its jobs report for May on Friday. Economists are forecasting a gain of 190,000 jobs during the month, up from the 175,000 jobs added in April, which was the lowest level of 2024. And the unemployment rate is expected to remain unchanged at 3.9%.
The jobs market continues to tighten as the BLS reported on Tuesday that job openings for April fell below 8.1 million. That was down 296,000 positions on a monthly basis and down 1.8 million year over year.
Meanwhile, the Federal Open Market Committee is set to meet June 11-12 and release a new summary of economic projections. The Fed is not expected to change its benchmark rate, which has remained at a range of 5.25% to 5.5% since July 2023. Expectations of multiple rate cuts in 2024 have been dashed as inflation continues to run above the Fed’s 2% annual target and employers continue to add jobs at a healthy clip.
The typically brisk spring homebuying season has been relatively subdued, with Lawrence Yun, chief economist for the National Association of Realtors (NAR), recently calling the market activity a “disappointment.“
NAR reported that the annual sales rate for existing homes dropped by 1.9% from March to April, while the sales rate for new homes tumbled 4.7% during the same period, according to data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
Altos Research reported that a total of 605,000 single-family homes were listed for sale this week. That was up 1.7% from the prior week and 39% higher than year-ago levels.
Although states like Arizona, California, Florida, Georgia and Texas are “driving the bulk of the inventory increase for country,“ most states have seen for-sale inventories rise at least 30% since June 2023, Altos founder and president Mike Simonsen wrote on Monday.
The 406,000 pending sales this week, however, were only 1% higher on a year-over-basis.
“Any of the growth in home sales feels like it has evaporated,“ Simonsen wrote. “Also, the pending sales count will typically start declining in mid-June, as the market shifts from the spring season to the summer. So, we’re probably at the peak of the sales now.“
Mortgage rates kept sliding toward 7% as HousingWire’s Mortgage Rates Center showed the average 30-year fixed rate for conforming loans at 7.25% on Tuesday, below the rate of 7.34% one week ago.
At the same time one year ago, the average 30-year conforming rate was 6.8%. Meanwhile, the 15-year conforming fixed rate averaged 6.77% on Tuesday, up from 6.71% one week earlier.
“We have an excellent tug-of-war on rates now because people have wised up to the fact that the labor market isn’t tight anymore, and the Fed doesn’t seem like it wants to get ahead of the curve on a softer labor market,” HousingWire lead analyst Logan Mohtashami said. “So, the bond market is mindful of this as it wants to avoid getting caught off guard if jobs week shows another week of the labor market getting softer.
“For the summer, the labor market data is the biggest driver of where rates can go; if we do see more material weakness in the labor data, rates can go lower; if it firms up, rates can stay elevated.”
Between May 17 and May 24, for-sale inventory rose from 578,016 to 594,548, reaching its peak for 2024. During the same period, there were 72,329 new listings, according to Altos Research data.
“The mortgage rate lockdown premise holds that very few people will list their homes when mortgage rates are this high, thus suppressing inventory. But 2024 has proven that theory wrong,” Mohtashami wrote on Saturday. “This week, we saw inventory growth of 16,532. All smiles here — last year, we didn’t have this type of positive growth.”