Some economists say home sales will increase in 2024 as mortgage rates ease.
LOS ANGELES (AP) — Home loan financing costs eased again this week, pulling the average long-term U.S. mortgage rate down to a six-month low.
The average rate on a 30-year mortgage dropped to 6.67% from 6.95% last week, mortgage buyer Freddie Mac said Thursday. A year ago, the rate averaged 6.27%.
The latest drop in rates is the eighth in as many weeks. The average rate is now back to where it was in late June.
“The 30-year fixed-rate mortgage remained below 7% for the second week in a row, a welcome downward trend after 17 consecutive weeks above 7%,” said Sam Khater, Freddie Mac’s chief economist.
Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loan, also declined this week, with the average rate falling to 5.95% from 6.38% last week. A year ago, it averaged 5.69%, Freddie Mac said.
Mortgage rates have been easing since late October, when the average rate on a 30-year home loan reached 7.79%, the highest level since late 2000.
The decline has tracked the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield, which in mid-October surged to its highest level since 2007, has been falling on hopes that inflation has cooled enough for the Federal Reserve to shift to cutting interest rates after yanking them dramatically higher since early last year.
Investors’ expectations for future inflation, global demand for U.S. Treasurys and what the Fed does with its benchmark federal funds rate can influence rates on home loans.
The sharp runup in mortgage rates that began early last year has pushed up borrowing costs on home loans, reducing how much would-be homebuyers can afford even as home prices have kept climbing due to a stubbornly low supply of properties on the market. That’s weighed on sales of previously occupied U.S. homes, which are down 19.3% through the first 11 months of this year.
Despite the recent decline, the average rate on a 30-year home loan remains sharply higher than just two years ago, when it was 3.05%. The large gap between rates now and then is contributing to the low inventory of homes for sale by discouraging homeowners who locked in rock-bottom rates two years ago from selling.
Still, if rates continue to move lower, that could motivate more homeowners who want to sell to list their homes.
Several housing economists are forecasting that home sales will increase next year as mortgage rates ease further, leading to a pickup in the inventory of homes on the market.
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