Mortgage rates bumped back up this week but overall remain in the low 6% range, contributing to a subdued but steady spring market, according to economists.
The average mortgage rate ticked increased 7 basis points to 6.30%, up from 6.23% last week, and back to the same point from two weeks ago, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
Noting that rates are nearly half a percentage point lower than they were last year at this time, Bright MLS Chief Economist Lisa Sturtevant said buyers still remain tentative.
“There are some signs of life among buyers as pending sales have inched up ever so slightly over the past four weeks,” Sturtevant said. “But the fact remains that we are not going to see rates fall below 6% anytime soon, and the spring housing market is going to be much more subdued than forecasts suggested at the end of last year.”
Sturtevant expects rates to remain in the low-6% range and that homebuyers and sellers will continue to proceed cautiously this spring. “Geopolitical and labor market uncertainty create headwinds to housing market activity, but changing family circumstances and needs will bring out buyers and sellers despite that uncertainty,” she said.
Sturtevant also noted that buyers and sellers are resetting expectations and accepting that mortgage rates will remain above 6%.
For sellers? “Prospective sellers are learning they need to price strategically, reflecting current, local market conditions in their asking price,” she said, and buyers: “Can take advantage of more inventory but still can’t be too choosy in some markets. And everyone is getting a little bit more used to uncertainty, and as we become more acclimated to it, uncertainty becomes less of an obstacle.”
Realtor.com Economist Jiayi Xu said while the interest-rate hold by the Fed this week was unsurprising, the dissent among the voters still raises further uncertainty of monetary policy ahead.
“Despite the key decisions and upcoming leadership transition for the Fed, geopolitics is likely to be the bigger driver of mortgage rates in the near term,” Xu said. “With the U.S.–Iran peace talks hitting an impasse this week, the 10-year treasury bond rose above 4.3% and passed the 4.4% threshold after the Fed left rates unchanged and expressed concerns about the overall uncertainty tied to Middle East tension.”
The 10-year Treasury yield serves as a key economic benchmark, and mortgage rates tend to follow it.
Freddie Mac Chief Economist Sam Khater noted purchase demand is holding strong amid unexpected seasonal challenges. “As rates had modestly declined the last few weeks, purchase demand has accelerated with purchase applications rising to over 20 percent above a year ago,” Khater said. “It is clear that purchase demand continues to hold up as prospective buyers react to both modestly lower rates and more inventory to choose from than the last few years.”
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