The traditional spring homebuying season has commenced and the 30-year fixed mortgage rate has fallen for the fourth week in a row.
But while rates and home price growth are trending downward, demand has been pulled back once more.
“Unfortunately, those in the market to buy are facing a number of challenges, not least of which is the low inventory of homes for sale, especially for aspiring first-time homebuyers,” said Sam Khater, Freddie Mac’s chief economist.
Buyers and sellers may be waiting for better conditions, but with the prime selling time approaching mid-April, experts say sellers should start adjusting expectations.
30-year fixed-rate mortgages
The 30-year average fixed rate slipped from 6.32% to 6.28% this week. A year ago at this time, the rate averaged 4.72%.
“Compared to the recent 7% average rate peak, the latest rate saves $140 per month for a homebuyer on a $300,000 loan,” says Lawrence Yun, chief economist at the National Association of Realtors (NAR).
Yun explains that ongoing apartment construction may limit rent growth, calm inflation and encourage the Fed to stop raising the federal funds rate.
He says while rates may fluctuate week-to-week, there’s “a clear possibility of going under 6% by the year’s end.”
15-year fixed-rate mortgages
The average 15-year fixed rate actually shifted up to 5.64%. This time last week, the rate averaged 5.56%, compared to 3.91% a year ago.
“The current market is seeing lower demand and fewer fresh listings as buyers and sellers weigh whether to dip a toe in or wait until conditions improve,” writes Hannah Jones, economic research analyst at Realtor.com.
Jones notes that while sales prices are softening, March listing prices were still 6% higher than last year’s level — which, combined with higher mortgage rates, meant prospective buyers were looking at a home payment about 26% pricier than a year ago.
“Each gain in affordability is accompanied by new buyer activity and while buyers and sellers can’t control mortgage rates, lower home prices can drum up demand by making a home purchase more feasible.”
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Fewer options for buyers to find their dream home
“This spring season presents a mixed bag of trends for both home buyers and sellers,” says Sabrina Speianu, economic data manager at Realtor.com.
Although home prices growth and mortgage rates are declining, they’re still relatively high compared to last year. Speianu said this could also mean buyers can look forward to a less competitive market — however, lower seller sentiment means fewer home listings on the market for buyers to use as well.
In fact, new listings are down 22% compared to the same period last year, with the median listing price at $428,000.
“Typically, the spring season is a busy time for the real estate market, but this year, the seasonal growth in the inventory of homes for sale has been sluggish,” she notes. “This has been eaten in fewer options for home buyers to find their dream home.”
The market is expected to become more active this month, but Speianu advises sellers to adjust their expectations and pricing to consider current market conditions.
Mortgage applications fall back despite lower rates
Demand for mortgages dove 4.1% from last week, according to the Mortgage Bankers Association (MBA).
Refinance activity also dropped by 5% — and was 59% lower than the same week a year ago.
“Spring has arrived, but the housing market is missing the customary burst in listings and purchase activity that typically marks the season,” says Mike Fratantoni, senior vice president and chief economist at the MBA.
“We do expect strong demand from first-time homebuyers over the next several years given the large number of millennials hitting peak first-time homebuyer ages, but affordability remains a real challenge in this environment,” Fratantoni added.
Buying a house isn’t the only investment in real estate
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.