Mortgage rates have reached their lowest point since mid-March but economists worry inflation and economic uncertainty caused by tensions in the Middle East will result in temporary decreases versus more sustained stability.
The average mortgage rate ticked down 7 basis points to 6.23%, down from 6.30% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
Bright MLS Chief Economist Lisa Sturtevant said the decline is a welcome tailwind for the spring market but is being met with a growing set of headwinds.
“Inventory is finally improving, giving buyers more options. Yet, higher inflation and economic uncertainty are serious concerns, which is reflected in the record low consumer sentiment reported by the University of Michigan earlier this month,” Sturtevant said. “Recent data also showed home builders’ confidence dropping this spring as suppliers face increased material costs driven by higher fuel prices.”
Looking ahead, she said mortgage rates will likely continue to be volatile throughout the spring. “While purchase applications increased nearly 8% last week in response to lower rates, homebuyers remain highly sensitive to even small fluctuations. For the market to regain full momentum, we will need to see more than just a temporary dip in rates. Rather, we need sustained stability in the global energy market and a clearer sign that domestic inflation is back on a downward trajectory,” Sturtevant cautioned.
Realtor.com Senior Economist Joel Berner pointed to a minor decline in the yield on the 10-year Treasury, which gave mortgage rates a bit of breathing room to continue to retreat back toward where they were prior to the outbreak of the war in Iran. But he also noted the need for a more stable long-term outlook.
“The ceasefire in that conflict has been extended, but tensions remain high and it remains to be seen whether the severe market disruptions that have characterized the last two months will subside for good,” Berner said. “Oil prices remain elevated, injecting inflationary pressures into the economy at large, but interest rates have responded positively to the promise of peacemaking, and their decline is welcome news to the housing market.”
Sam Khater, chief economist for Freddie Mac, agrees these recent weeks’ dips are providing a needed boost to the spring market.
“Rates currently stand at their lowest level in the last three spring homebuying seasons,” Khater said. “This improvement, coupled with a pickup in purchase applications and refinance activity, as well as an increase in monthly pending home sales, underscores signs of improving momentum in the market.”
Click here for the full Freddie Mac report.
