Mortgage rates continued their upward march, coming in above year-ago levels for the first time in 44 weeks, but economists are pointing to improving trends in housing inventory and list prices as a silver lining for buyers.
The average 30-year fixed mortgage rate (FRM) rose three basis points this week to 6.69%, up from 6.66% last week, while the 15-year FRM averaged 6.01%, down from 6.04% last week, according to the latest Primary Mortgage Market Survey® (PMMS®), released by Freddie Mac Thursday.
Rates have been increasing for the last five consecutive weeks, and have increased to 6.77% as of this writing.
Realtor.com Chief Economist Danielle Hale said the upward move comes despite a choppy week in the bond market.
“The 10-year Treasury yield hit an 18-month high above 4.7% in late July before pulling back several basis points this week on hopes that the U.S. and Iran are nearing a deal to reopen the Strait of Hormuz,” Hale said, noting that mortgage rates have been slow to follow that pullback. “Friday’s jobs report, next week’s inflation report, and how the Hormuz talks resolve, will determine whether that gap closes in the coming weeks.”
Realtor.com Economist Intern Glen Morgenstern added that while the Fed held rates steady at its July meeting last week, three regional presidents dissented in favor of a hike and Chair Kevin Warsh has continued to withhold forward guidance, which “leaves markets to parse incremental data for clues on the Fed’s next move,” he said. “That’s part of why this week’s Hormuz headlines moved yields as much as they did. With the Fed offering few signals of its own, any news that touches on inflation outlook, including energy prices tied to the Strait of Hormuz, carries outsized weight right now.”
But economists say declining listing prices and increasing inventory in some regions are positive signs for buyers.
According to Realtor.com’s July housing report, median list prices are down 2.4% year over year, a ninth straight month of declines, the portal reported.
“Sellers are still pricing more conservatively from the outset, though price cuts, still just below last year’s pace, are converging toward it,” Morgenstern stated. “That convergence is sharpest in the Northeast and Midwest, the same regions Realtor.com coverage of Community Development Block Grants flagged as where new incentives tied to the 21st Century ROAD to Housing Act could matter most, since that’s where the housing shortage is most acute.”
Those incentives could end up helping younger buyers most directly, he said.
Freddie Mac Chief Economist Sam Khater added, “While mortgage rates continue to influence affordability, the housing market is showing signs of adjustment, with listing prices modestly below year-ago levels and for-sale inventory improving from the limited supply seen in recent years.”
To read the full report from Freddie Mac, click here.
