Mortgage rates dropped for the second week in a row, this time sharply from 5.70% last week to 5.30% this week, amid concerns about a potential recession. This is according to the latest Primary Mortgage Market Survey® (PMMS®) released by Freddie Mac Thursday.
Key findings:
- 30-year fixed-rate mortgage averaged 5.30% with an average 0.8 point as of July 7, 2022, down from last week when it averaged 5.70%. A year ago at this time, the 30-year FRM averaged 2.9%.
- 15-year fixed-rate mortgage averaged 4.45% with an average 0.8 point, down from last week when it averaged 4.83%. A year ago at this time, the 15-year FRM averaged 2.20%.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.19% with an average 0.4 point, down from last week when it averaged 4.50%. A year ago at this time, the 5-year ARM averaged 2.52%.
What the experts are saying:
“Over the last two weeks, the 30-year fixed-rate mortgage dropped by half a percent, as concerns about a potential recession continue to rise,” said Sam Khater, Freddie Mac’s chief economist. “While the drop provides minor relief to buyers, the housing market will continue to normalize if home price growth materially slows due to the combination of low housing affordability and an expected economic slowdown.”
Realtor.com Senior Economic Research Analyst, Joel Berner commented, “The Freddie Mac fixed rate for a 30-year loan took a sharp drop this week, falling to 5.30% and offsetting some of the significant rate increases of May and June amid rising recession concerns. The 40-basis-point fall from last week comes on the heels of the recent volatility in the 10-year Treasury yield, which dropped below 2.8% in the first week of July and rebounded to 2.9% Wednesday after spending most of June above 3%. Continued fears of a bear market have driven investors into safer, longer-term bonds, driving up the price of the 10-year note and pushing its yield below that of the 2-year Treasury. This inversion might sound ominous, especially in the midst of sustained inflation that both markets and the Fed agree will likely require more Fed Funds rate hikes to tame. Economists and policy makers will watch closely to see whether these market conditions will lead to increases in the unemployment rate or decreases in production that characterize a recession.
“Prospective homebuyers who have been waiting through 24 consecutive months of year-over-year listing price growth of more than 8.5% may be well-positioned to make a purchase soon if current trends continue. Mortgage rate stabilization could allow them to lock in a lower monthly payment and take advantage of current increases in the number of homes for sale. In June, active listings increased by 18.7% over last year, the largest annual growth in realtor.com® data history. With more homes on the market, sellers are being forced to compete on prices: 14.9% of listings nationwide had their price reduced last month, the highest rate since before the pandemic began. Though the cost of financing a home remains high relative to recent years, buyers will have more chances to find homes in their price range as the undersupplied and overheated housing market starts to cool,” Berner concluded.
