Mortgage rates in the United States have recently seen a significant decline, reaching their lowest level since June. This decrease has brought some relief to the housing market, which was struggling due to increased borrowing costs.
According to a lender survey released by Freddie Mac, the average rate for a standard 30-year fixed mortgage has fallen approximately a quarter percentage point to 6.67%. This decline represents a substantial decrease from the near 8% peak observed this fall, with rates now more than a full percentage point lower. Just last week, rates dipped below 7% for the first time since August.
The consistent decrease in borrowing costs, which have been falling weekly since reaching a high of 7.79% in late October, is particularly beneficial for prospective homebuyers. These buyers had been delaying purchases due to the historically low affordability of the housing market. With the Federal Reserve expected to scale back its measures against inflation, many economists anticipate a boost in home demand and a further reduction in mortgage rates.
Sam Khater, Freddie Mac’s chief economist, notes that the lower rates are enticing potential homebuyers who were previously hesitant, back into the market.
Supporting this trend, the National Association of Realtors reported an increase in the sales of previously owned homes in November, following a five-month period of decline. This rise in sales, even though deals might have been closed when borrowing costs were at their highest in two decades, indicates a shift in buyer activity in response to the falling mortgage rates, as observed by Hannah Jones, a senior economic research analyst at Realtor.com.
Despite these positive signs, the housing market still faces challenges. Buyers are dealing with a severe shortage of available existing homes, which keeps prices elevated. Homebuilders are attempting to address this gap by offering incentives such as discounted mortgages, contributing to a gradual improvement in market conditions.
