Mortgage Rates Hold Steady As More Homebuyers Drop Out
Rates for home loans were little changed this week, a sliver of good news for many home shoppers exhausted by the high cost of housing and limited supply.
The 30-year, fixed-rate mortgage averaged 5.09% in the week ending June 2, according to Freddie Mac. That’s down just one basis point—one one-hundredth of a percent—from last week, but still up sharply from 2.99% a year ago.
The average 15-year fixed-rate mortgage was 4.32% up one basis point from last week. At this time last year, it averaged 2.27%.
Those rates don’t include fees and other costs associated with obtaining home loans.
Related: Compare Current Mortgage Rates
What’s Ahead For the Housing Market
While rates have eased somewhat from the peaks of early May, it may be little help for home shoppers. Inventory remains tight and prices high. Across the country, the median asking price for newly listed homes was $447,000, up nearly 18% compared to this time a year ago, according to Realtor.com. Meanwhile, the supply of houses actively listed to buy was down 48.5% compared to May 2020, the start of the COVID-19 pandemic.
“In other words, there are still only half as many homes available,” the Realtor report said.
The bleak numbers are discouraging many home shoppers. Last week, the number of new mortgage applications was at the lowest level since December 2018, according to a release from the Mortgage Bankers Association.
However, some experts think that’s a good thing in order to get to a more “normal” housing market.
“The potential homebuyer pool has shrunk, supply is on the rise and the housing market is normalizing,” said Sam Khater, Freddie Mac’s chief economist, in a statement. “This is welcome news following unprecedented market tightness over the last couple years.”
Tips For Homebuyers in a Hot Housing Market
If you’ve been searching for a home with no luck, this might be a good time to take a breather. You can use the time to save for a larger down payment, improve your credit profile, or cut down your debt. All of these steps will help reduce your mortgage costs.
Rich Harty, a real estate agent at Harty Realty Group in the Chicago area, says a few of his buyers have “stepped out” of the market until next year.
“They weren’t able to compete because rates were going up and they were already pushing the top of their budget,” Harty says. “They’re taking a step back, hoping supply comes back, prices adjust and then maybe they can get the house of their dreams.”
You also want to make sure you take the time to find a reputable real estate agent and lender. Challenging markets like the one now are when experienced Realtors and mortgage brokers can help you best navigate and prepare for buying a home.
Even if you’re taking a hiatus from visiting open houses and writing offers, Harty says you should still keep tabs on the market.
“Absolutely keep the searches going, and maybe the right house comes along,” he says. “I urge you to be patient. The more information you have, you’re in a better position to make the right decision.”