As pending sales and existing home sales showed modest improvement in May, economists say despite mortgage rates remaining around 6.5%, homebuyers seem to be adapting to the current environment.
The average 30-year fixed mortgage rate increased 2 basis points to 6.49% from 6.47% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
“Today’s essentially sideways reading marks the first mortgage rate print of the summer after an extremely volatile spring,” said Realtor.com Senior Economist Jake Krimmel. “In just the first ten weeks of spring, rates swung from 6.22% in late March to 6.46% in early April, before dropping back to 6.23% in late April, then climbing above 6.5% by late May. Today’s reading of 6.49 marks the sixth consecutive week of rates hovering near 6.5%, and this stretch of stability, even at elevated levels, is a signal in and of itself.”
Krimmel added that while the war in Iran appears to be winding down, the uncertainty introduced into the bond market because of it as well as continued unrest in the Strait of Hormuz, are keeping rates and inflation elevated.
“Today’s Personal Consumption Expenditure (PCE) inflation report showed headline PCE climbing to 4.1%, its highest level since April 2023, with core PCE (which strips out the oil and gas price volatility) running at 3.4% and still well above the Fed’s 2% target,” Krimmel said. “And if Iran continues to threaten the Strait of Hormuz shipping, a ceasefire alone may not be enough to move bond markets or mortgage rates. Unfortunately, both inflation and mortgage rates appear to be staying higher for longer.”
He added that in addition to buyers, sellers appear to be adjusting too, with listing prices now down year over year for seven straight months.
“New home sales and construction starts, meanwhile, are struggling with the same affordability headwinds,” he said. “Still, rates remain more than 30 basis points below where they stood this time last year. That gap is reason enough to hope 2026 can avoid a second consecutive cruel summer.”
Sam Khater, Freddie Mac’s chief economist agreed consumers are adjusting to more elevated rates based on purchase as well as refinance activity.
“Meanwhile, purchase activity eased modestly and refinance activity has continued to pick up recently, reflecting borrowers’ responsiveness to current rate levels,” Khater said.
To view the full report, click here.
