Mortgage Rates Drop Again, But Homebuyers Still Face Obstacles in Spring Season
Great news for homebuyers as mortgage rates have fallen for the fourth consecutive week, according to Freddie Mac. The average rate on a 30-year fixed mortgage has dipped to 6.28% from 6.32% the previous week. But is the decrease enough to offset other challenges faced by buyers? Even with lower rates, the persistent lack of inventory remains an obstacle, and rates haven’t fallen enough to persuade many owners to list their homes. This maintains a housing gridlock that is keeping prices elevated.
Affordability & Availability
According to Jeff Tucker, a senior economist at Zillow, “Affordability and availability of homes are the biggest hurdles for buyers in today’s market, though both are driven by mortgage rates.” He explained that many homeowners are not willing to sell their current homes. This further limits the available inventory for buyers. As a result, the volume of mortgage applications for a home purchase decreased by 4% on a seasonally adjusted basis from one week earlier.
Keith Gumbinger, vice president of mortgage website HSH.com, said, “It’s buyers at the fringes of affordability that are affected the most.” The lower rates may not be enough for them to participate in their local markets. Additionally, the low number of homes for sale remains a significant obstacle for buyers. According to the National Association of Realtors, the unsold inventory in March is at a 2.6-month supply. A healthy market typically has a 6-month supply.
Many homeowners have sub 6% rate right now
Furthermore, Redfin reported that 85% of homeowners had a rate below 6% as of September 2022. This is causing many homeowners to hold off on selling. The sellers who do list their homes are getting more reluctant to offer discounts as rates fall and inventory remains scarce. On top of that, the median asking price has been rising steadily since January.
As a real estate agent in Castle Rock, CO, I recommend that homebuyers remain patient and persistent, as the current market conditions may require more effort and time to find their dream home. While lower mortgage rates provide some relief, buyers still need to navigate the lack of inventory and increasing competition. However, waiting too long, or for the interest rates to drop too much may also backfire. Historically as interest rates drop, demand increases, which will likely drive prices up further. Working with an experienced agent who has local market knowledge can help buyers make informed decisions and increase their chances of success in this challenging market. Reach out if you would like to have a discussion on your situation! I would love to help you determine when buying and selling makes the best sense for you.
Thanks for reading!