Mortgage rates declined for the third week in a row, with the average rate on a 30-year fixed mortgage falling below 7% for the first time since February. Most fixed and adjustable mortgage rates continued to retreat as the markets anticipate tighter financial conditions and an economic slowdown in the coming months.
Here are the current mortgage rates, without discount points unless otherwise noted, as of March 30:
— 30-year fixed: 6.92% (down from 7% a week ago).
— 20-year fixed: 6.71% (down from 6.78% a week ago).
— 15-year fixed: 6.12% (down from 6.2% a week ago).
— 10-year fixed: 6.29% (up from 6.25% a week ago).
— 5/1 ARM: 5.66% (down from 5.71% a week ago).
— 7/1 ARM: 5.77% (down from 5.86% a week ago).
— 10/1 ARM: 6.11% (down from 6.14% a week ago).
— 30-year jumbo loans: 6.99% (down from 7.06% a week ago).
— 30-year FHA loans: 5.84% with 0.06 point (down from 6% a week ago).
— VA purchase loans: 6.02% with 0.05 point (down from 6.21% a week ago).
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“Economic uncertainty continues to bring mortgage rates down. Over the last several weeks, declining rates have brought borrowers back to the market, but, as the spring homebuying season gets underway, low inventory remains a key challenge for prospective buyers.”
— Sam Khater, Freddie Mac’s chief economist, in a March 30 statement
The average 30-year mortgage rate has fallen about a quarter-point over the past several weeks, giving much-needed relief to buyers who are gearing up for the spring homebuying season. Still, borrowers are increasingly responsive to small rate fluctuations. Home sales rebounded in February
when rates were about a half-point lower than they are now, so it’s likely that any further rate declines will bring a flurry of buyers back into the market.
Additionally, the inventory of homes for sale has been steadily decreasing since September, hitting a record low for the month of February, according to Zillow. That’s especially true for existing-home inventory, with homeowners reluctant to sell their homes and sacrifice a sub-3% mortgage rate.
“We know there are a lot of motivated buyers looking for homes. When we see mortgage rates fall, sales pick up,” says Skylar Olsen, Zillow’s chief economist, in a news release. “But buyers are disappointed in their options. Homeowners aren’t giving up their current house and low monthly payments to join a tight, expensive market.”
Homebuyers may find that they have fewer homes to choose from, but they’re also competing with fewer buyers for the ones that are available. Although competition remains fierce for well-priced homes, the market is nowhere near as heated as it was when bidding wars drove sale prices to record highs. It may be possible for buyers in some regional markets to take advantage of cooling home prices to offset the impact of higher mortgage rates — at least partially.
[Compare: Mortgage and Refinance Rates in Your Area.]
Indicator of the Week: East Coast vs. West Coast
Home prices continued to fall in January for the seventh consecutive month, according to the S&P CoreLogic Case-Shiller Index. Nationally, home values declined by 0.5% between December and January. On an annual basis, January home prices were 3.8% higher than they were a year earlier, although that’s down from 5.6% for the year ending in December 2022.
“Prices have continued to soften as sellers in the market adjust to the price level necessary to stoke buyer demand,” says Hannah Jones, economic data analyst at Realtor.com. “As we move into the spring buying season, mortgage rates have ticked lower, a welcomed sign of progress towards affordability.”
When comparing price changes in the 20 largest metro areas in the interactive map below, you can almost draw a line right through the center of the country. To the east, home values continued to grow on an annual basis; to the west, prices were declining. Zoom in even more and you’ll see that the strongest region is the Southeast, which saw home prices increase by 10.2% between January 2022 and January 2023.
The American housing divide has become even more stark in recent months. Home values had already begun falling in San Francisco and Seattle, with San Diego and Portland added to the list of declining metros in January. Meanwhile, Miami has been the best-performing city for home price growth for the past six consecutive months.
Looking ahead to the spring, home prices nationally are likely to cool further as mortgage rates remain elevated. Despite recent turmoil in the commercial banking industry, the Federal Reserve continued hiking rates in March to fight inflation, and lenders have begun to tighten their credit standards when issuing mortgages.
“More expensive, less available borrowing, especially with an unclear economic outlook, is likely to continue to limit buyer demand,” Jones says. “Though home sales are expected to rebound in line with seasonal trends, this spring’s sales pace is expected to remain lower than last year, as uncertainty and high costs limit activity. Many sellers will feel the pressure to list their home for a lower price to ensure sufficient buyer attention and a quick sale.”
Affordability woes may hit markets in the West even harder, with buyers unable to reconcile current mortgage rates with still-high home values. But even in more affordable Southern cities that have been somewhat resilient to annual home-price declines, recent cooling in the housing market will begin to show up in future Case-Shiller releases. Home values declined in every top 20 U.S. city besides Miami during the past month — so when we compare this spring’s prices to the record highs set last year, they’ll almost surely come back negative.
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Mortgage Rates Drop for Third Consecutive Week originally appeared on usnews.com
