While mortgage rates continue to tick up amid continued economic uncertainty, economists note the spring market is proving more resilient than expected, mainly due to rates remaining much lower than a year ago at this time.
The average mortgage rate increased 2 basis points to 6.53%, up from 6.51% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
Realtor.com Senior Economist Jake Krimmel said rates essentially remained flat after a volatile stretch sent the 10-year Treasury from 4.66% on May 19 down to just under 4.5% by midweek. Optimism over a ceasefire in the Iran conflict may be giving bond markets a reason to settle, he said noting rates still held firm this week even as Treasury yields pulled slightly back.
“Three months into the conflict (with Iran), mortgage rates have climbed 55 basis points from multi-year lows of 5.98%, a trend that is all about rising prices and inflation expectations,” Krimmel said. “When bond markets sense more uncertainty and greater price pressures, rates go up. Unfortunately for prospective homebuyers, that’s exactly what the war in Iran has delivered. Still, there’s an important silver lining for housing demand right now: rates remain 36 basis points below where they were at this point last year. And that may explain why this spring has proven more resilient than the tariff-marred one last year.”
Krimmel also noted that despite higher rates and more economic uncertainty than expected, this spring is shaping up as the most active in four years.
“The market’s momentum before the conflict has not collapsed, but affordability has eroded on two fronts: higher mortgage rates and inflation quietly eating away at real wage gains,” he said. “Buyers have more homes to choose from and asking prices continue to soften, but their dollars don’t stretch as far as they did a few months back. A resolution to the conflict, therefore, would do a world of good for mortgage rates, consumers and housing market momentum.”
Sam Khater, Freddie Mac’s Chief Economist pointed to recent months’ increases in pending home sales as a clear sign of buyer interest remaining high. “Pending home sales have increased three months in a row, indicating there’s latent demand and homebuyers are ready to jump back into the market if mortgage rates decline,” he said.
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