The average 30-year-fixed mortgage rate dropped to its lowest level in seven weeks, but is still hovering in the mid-6% range, indicating to economists that buyers–mainly in the higher-income bracket–are coming to terms with this rate environment as the new normal.
The average 30-year fixed mortgage rate decreased 6 basis points to 6.43% from 6.49% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
Economists noted buyers are coming to terms with the mid-6% range as the “new normal.”
“Housing data released this week suggests buyers and sellers are adapting to the current rate environment rather than waiting it out,” said Realtor.com Economist Intern Glen Morgenstern. “The Realtor.com June housing report found listing prices down 2.5% year over year, the steepest annual decline in the data series since 2017, while pending sales grew for a seventh straight month.”
However, Bright MLS Chief Economist Lisa Sturtevant noted that activity remains challenging for buyers at more moderate income levels.
“Affordability is a major constraint to housing market activity as rates remain elevated and home prices continue to rise,” Sturtevant said. “Higher-income, all-cash, and repeat buyers are driving home sales activity, while moderate-income and first-time buyers have been forced to the sidelines.”
She noted first-time buyers are more likely to be using gifts from relatives and finding other creative solutions, such as buying a home with rental income potential, to get into a “very difficult” housing market. Both pointed to notable disparities in buying activity in different regions.
“Wide regional differences persist with a nearly nine-point gap between the strongest price-growth metro (Chicago) and the weakest (Seattle),” Morgenstern said.
“The best markets for buyers are in the south and west where home price growth has eased, and prices have even started to fall year-over-year, as inventory has climbed,” said Sturtevant. “In the near-term, with rates remaining between 6.4% and 6.6% and home prices steady or rising in many markets, we should expect to see more of the ‘K-shaped’ housing market with the higher-end of the market resilient and the lower-end stagnant.”
Freddie Mac’s Chief Economist Sam Khater called the shift to acceptance of the current rate environment a positive sign.
“With rates at a seven-week low and purchase demand continuing to edge higher, it’s an encouraging sign as prospective homebuyers respond to modest improvements in affordability,” he said.
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