Mortgage rates saw some slight improvement this week, falling 5 basis points after three weeks of increases, but it seems the housing market can’t catch a break as economists note that inventory challenges have returned in many areas.
The average 30-year fixed mortgage rate decreased to 6.48% from 6.53% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
Bright MLS Chief Economist Lisa Sturtevant noted that prospective homebuyers are starting to come to terms with the ‘new normal’ of rates in the mid-6% range, adding, “While rates are higher than they were at the start of the year, they are still more than 30 basis points lower than last year and are more than 50 basis points lower than two years ago.”
However inventory challenges have returned to many markets, bringing back another headwind to an already stressed spring market, she said. “After rising steadily over the past year, overall inventory growth has slowed and in many markets, active listings are now lower than they were last June.
“Slower inventory growth suggests that stuck mortgage rates are impacting sellers more than buyers,” Sturtevant said. “Rate lock continues to hold back some would-be sellers as homeowners do not want to trade in their pandemic-era mortgage rate with one that is much higher. Even buyers who have begrudgingly accepted rates where they are could hold back if they cannot find the right home.”
Realtor.com Senior Economist Joel Berner noted that while the 10-year Treasury yield held below 4.5% through the end of last week before climbing slightly early this week, gave mortgage rates some room to relax a bit, repeated mixed messages regarding the war in Iran are not doing the market any favors.
“The news surrounding a ceasefire in Iran has been uneven to say the least,” Berner said. “At times the market seems to react positively to diplomatic developments, and then soon after we hear about missiles being fired or talks breaking down. This conflict is currently the main driver of still-high mortgage rates, as the oil shock ripples inflation fears throughout the global economy. We expect to see further mortgage rate relief once the Strait of Hormuz is opened for good.”
However he noted that this week’s rate reduction is welcome news for would-be buyers who have been reluctant to make a purchase in 2026 despite market conditions moving strongly in their favor. “Listing prices have now fallen on a year over year basis for seven straight months, the inventory of homes for sale is the highest it has been since before the pandemic, and time on market continues to slow.
“Despite these flashing green lights for buyers, high mortgage rates and low consumer sentiment stemming from the war in Iran have led to only a 2.6% year over year improvement in the number of contract signings in May,” Berner added. “The housing market is ready for takeoff, but further rate relief and stronger buyer confidence are needed to end the ground stop.”
For the full Freddie Mac report, click here.
