Mortgage rates dropped for the third straight week, giving potential homebuyers some relief in a volatile interest rate market, according to Freddie Mac.
The average 30-year fixed-rate mortgage decreased to 6.67% for the week ending June 22, according to Freddie Mac’s latest Primary Mortgage Market Survey. That marked a decline from the previous week when it averaged 6.69%. A year ago, the 30-year fixed-rate mortgage averaged 5.81%.
Meanwhile, the average rate for a 15-year fixed-rate mortgage dropped to 6.03%. That’s down from last week’s average of 6.1%. Last year, the 15-year fixed-rate mortgage averaged 4.92%.
Despite a recent decline in mortgage rates, market volatility still may be holding some would-be homebuyers back, Freddie Mac said.
“Potential homebuyers have been watching rates closely and are waiting to come off the sidelines,” Freddie Mac’s Chief Economist Sam Khater said in a statement. “However, inventory challenges persist as the number of existing homes for sale remains very low. Though, a recent rebound in single-family housing starts is an encouraging development that will hopefully extend through the summer.”
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Home price growth slows to record level
As mortgage rates have dropped in recent weeks, home price growth has slowed in the past few months.
Single-family home price growth increased by 2% in April, marking the lowest annual home price increase since March 2012, according to the latest CoreLogic Home Price Index (HPI) and HPI Forecast.
In addition, April’s data marked the sixth straight month of single-digit gains, CoreLogic said. But while less critical home price data may give potential homebuyers some relief, uncertainty in the interest rate environment and low inventory could still hold some people back, CoreLogic reported.
“While mortgage rate volatility continues to cause buyer hesitation, the lack of for-sale homes is putting firm pressure on prices this spring, leading to above-average seasonal monthly gains and a rebound in home prices in most markets,” CoreLogic Chief Economist Selma Hepp said in a statement. “Nevertheless, the recent surge in mortgage rates and continued inflation issues suggest that rates may remain elevated, leading home price appreciation to possibly relax this summer and return to average seasonal gains later in 2023.”
“Still, while slim inventory is pushing prices up once again and constraining affordability, recent trends suggest that home price growth in 2023 will fall in line with the historical 4% annual average,” Hepp continued.
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Will the Fed’s rate hike pause continue?
After raising interest rates 10 times since 2022 in an effort to bring down inflation to a 2% target range, the Federal Reserve paused interest rate hikes in June. Nonetheless, the federal funds rate remained at a targeted range of 5% to 5.25%, a 16-year high. Moreover, a Fed official said the central bank isn’t keeping future interest rate hikes off the table until it’s convinced it’s close to reaching its goal.
“I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2 percent objective,” Fed Governor Christopher J. Waller said in May at an economic summit in Santa Barbara, California.
Moreover, Fed Chairman Jerome Powell told reporters at a press conference that central bank policymakers expressed interest rates could increase by another half percentage point in 2023. The Fed will meet again in July.
Most recently, the Fed increased interest rates by 25 basis points in May even after some economists had predicted the Fed may loosen monetary policy following a banking crisis triggered by the collapse of institutions like SVB and Signature Bank.
“The likelihood of another hike or two has also increased given the lack of credit crunch the Fed was expecting from the banking sector,” Hepp said in previous statement. “As a result, mortgage rates, while still on a gradual decline, are likely to remain higher through the remainder of the year.”
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