Mortgage Rates Just Dropped-but Home Prices Have Done Something Even More Extraordinary
Mortgage rates fell again this week, following the Federal Reserve’s decision on Wednesday to not raise interest rates—a much-anticipated break in the wake of 10 consecutive rate hikes over the past year.
For the week ending June 15, the average 30-year fixed-rate mortgage rate sank to 6.69%, down from the previous week’s 6.71%, according to Freddie Mac.
Yet while all eyes are on interest rates of late, there’s been yet a more seismic shift in real estate that hasn’t happened in Realtor.com® data-gathering history since 2017: For the week ending June 10, median listing prices came in 0.9% lower than what they were this same week last year.
Homebuyers everywhere should solemnly (or ecstatically) pause for a moment to appreciate this. Listing prices have been on a never-ending upward tear for the past six years. To see them drop, even just a little, is a really big deal.
“This decrease in listing prices presents potential opportunities for homebuyers, especially considering the larger number of homes available compared to the same time last year,” notes Realtor.com economist Jiayi Xu in her recent analysis of housing data.
Mortgage rates dropped, home prices are down, and there are more homes on the market. Is this the trifecta that weary home shoppers have been waiting for? Here’s what the latest housing statistics mean for buyers and sellers in our latest installment of “How’s the Housing Market This Week?”
The mortgage rate forecast is bright
This week’s pause on rate hikes could be a turning point, although the Fed has indicated that rate hikes likely aren’t over. If inflation doesn’t subside, another hike or two could happen later in the year.
Higher rates could shake the already tenuous housing market, so much so that National Association of Realtors® Chief Economist Lawrence Yun has urged the Fed to actually take things a step further and cut interest rates.
“Considering the balance sheet difficulties faced by community banks and weakness in the commercial real estate sector, the Fed should look at cutting interest rates before the end of the year,” he said in a statement released on Wednesday.
But if interest rates do fall and inflation continues to slow, Danielle Hale, chief economist for Realtor.com, expects mortgage rates to fall even further—to the low 6% range by the end of the year.
What’s behind falling home prices
In addition to falling mortgage rates, home prices seem to be turning a long-overdue corner.
Home prices peaked last June at $449,000, and came in for the month of May at $441,000. It remains to be seen how this June’s home prices will compare with last year’s record high, although the most recent price drop offers what Xu calls a “glimmer of hope” of declining prices ahead.
And it wasn’t a federal institution dictating the downward trend here, but fed-up homebuyers tired of high rates and home prices refusing to put in offers.
“Hesitations among homebuyers play a significant role in driving this decline,” says Xu.
Inventory is up 10% from 2022
While homebuyers are putting their foot down on high home prices, sellers aren’t caving to their demands easily. For the past 49 weeks, the number of newly listed homes is down. For the week ending June 10, 22% fewer homes hit the market than a year ago.
Yet despite the lack of fresh listings, there are plenty for sale out there—that is, for buyers willing to sift through staler options that might have been on the market for a while.
Indeed, active inventory growth (that’s a combination of new and old listings) is up 10% for the week ending June 10 compared with last year.
“The number of homes for sale continues to grow, but compared to one year ago, the pace is slowing,” says Xu.
Homes continue to linger on the market
For 47 weeks, it’s taken longer to sell a home. For the week ending June 10, listings lingered 13 more days than they did last year.
“Nevertheless, May housing data show that homes were on the market just 43 days, faster than the average May from 2017 to 2019,” says Xu.
Yet while some buyers are making moves, many are waiting to see how the economy shakes out. The cost of homeownership remains simply too high for some buyers. And no one wants to go out on a financial limb that could snap anytime.
“The near-record high mortgage rates and still-high listing prices continue to create barriers to homeownership,” says Xu.
Source: Realtor.com News
