U.S. mortgage rates fell sharply and for the second straight week as monetary policies meant to slow the economy take hold of the housing market.
The rate on the popular 30-year fixed mortgage hasn’t fallen this much since December 2008, a new report shows.
Though rates have been rising for most of this year, the recent dips provide a sliver of hope for buyers.
Purchasing a home is now about 5% more affordable than it was a week ago, says Nadia Evangelou, senior economist for the National Association of Realtors.
That translates to savings of about $100 on a typical monthly mortgage payment.
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30-year fixed-rate mortgages
The average rate on a 30-year fixed mortgage fell to 5.30% this week, down from 5.70% a week ago, mortgage finance giant Freddie Mac reported on Thursday. A year ago, the 30-year rate was averaging 2.90%.
“Over the last two weeks, the 30-year fixed-rate mortgage dropped by half a percent, as concerns about a potential recession continue to rise,” says Sam Khater, Freddie Mac’s chief economist.
The Federal Reserve, which is trying to lower inflation by cooling the economy, hiked its benchmark interest rate three-quarters of a percentage point in June.
The central bank is likely to make another hike of the same magnitude when it meets again later this month, according to the minutes from last month’s Fed meeting.
15-year fixed-rate mortgages
The 15-year fixed-rate mortgage averaged 4.45% this week, down from 4.83% last week, Freddie Mac says. Last year at this time, the 15-year rate averaged 2.20%.
Higher borrowing costs have been tempering demand for homes, and the market is recalibrating.
“Home price growth has started to soften and price cuts are becoming more common, as sellers are finally being challenged and begin to reconsider their expectations,” Matthew Speakman, senior economist with Zillow, said in a recent interview.
Indeed, homeowners are being forced to shift their mindsets.
While many new listings are still selling within days, multiple-offer situations are fewer and farther between, says Corey Burr, a Washington D.C. real estate agent.
A seller should be prepared to make adjustments if a property doesn’t go under contract within two weeks of being listed.
“In these cases, we are seeing more broker commission incentives, more seller offers to help pay for buyer closing costs and outright list price reductions,” says Burr, senior vice president at TTR Sotheby’s International Realty.