Buyers Hold Steady as Mortgage Rates Remain Flat

As we keep an eye on the housing market, mortgage rates have remained steady this week, leaving many potential homebuyers in a holding pattern. Meanwhile, inventory is growing, but sellers are starting to pull back. Let’s break down the latest market trends and what they mean for you.

Mortgage Rates Update

This week, the average 30-year fixed-rate mortgage edged up slightly to 6.78%, just above last week’s 6.77%, according to Freddie Mac. The 15-year fixed-rate also saw a slight increase, reaching 6.07%. These rates have stayed relatively stable following a recent three-week decline.

What’s Next for Interest Rates?

Next week’s Federal Reserve meeting is expected to provide some clarity on the future of interest rates. While a rate cut in July is unlikely, many analysts anticipate that cuts could begin in September. Danielle Hale, chief economist at Realtor.com, suggests that even a ‘data dependent’ stance from the Fed could hint at lower rates on the horizon, potentially helping mortgage rates to remain steady or decrease slightly.

Canada’s Central Bank Takes Action

In contrast, Canada’s central bank has already implemented two interest rate cuts in the past two months, bringing its key policy rate to around 4.5%. This decision comes as Canada’s economy, with an unemployment rate of 6.4% in June, has been slower compared to the U.S., which had a 4.1% unemployment rate.

Buyers Remain Cautious

The current affordability challenges are impacting buyer activity. The Mortgage Bankers Association reports that the Purchase Index for mortgage applications dropped by 4% last week and is down 15% compared to last year. Joel Kan, MBA’s deputy chief economist, notes that many potential buyers are still finding it challenging to make the numbers work with the current rate levels and ongoing home-price appreciation.

Inventory Trends and Seller Behavior

With home sales slowing, inventory levels are inching closer to a more balanced market. According to Redfin, new listings are up 6.1% year-over-year, and active listings have increased by 18.7%. The months of supply now stands at 3.6, edging closer to a balanced market range of four to six months. However, Mike Simonsen, founder of Altos Research, predicts that inventory will likely peak late summer or early fall, ending the year with about 20% more inventory than last year. This increase still leaves inventory well below pre-pandemic levels.

Simonsen also notes that sellers are starting to pull back, which could limit further inventory growth. This trend, coupled with Doug Duncan’s observation from Fannie Mae that price growth may slow but remain positive year-over-year, suggests that the market is waiting for a shift in affordability.

The Bottom Line

As the housing market navigates these uncertain waters, many buyers are staying on the sidelines, waiting for more favorable conditions. With the Federal Reserve’s next moves under close watch, and sellers pulling back, the market remains in a state of flux. For potential buyers, keeping a close eye on rate changes and inventory trends will be key to making informed decisions in the coming months.

See original article: Buyers continue to hold out as rates stay put (realestatenews.com)