Lower Mortgage Rates Spark Interest from Buyers
The decline in mortgage rates is sparking activity in the housing market with prospective buyers showing rising interest in properties, according to real-estate platform Redfin, but that has yet to move into a jump in sales.
Last week, the 30-year fixed-rate mortgage ticked down to a 6.63 percent average, according to lender Freddie Mac. Rates may decelerate further as inflation cools, giving confidence to the Federal Reserve that it can begin to slash its funds rate after hiking them to battle soaring prices. A cut in rates would help bring down the cost of home loans even lower, analysts say, which at one point had skyrocketed to two-decade highs.
"Mortgage rates have been stable for nearly two months, but with continued deceleration in inflation we expect rates to decline further," Sam Khater, Freddie Mac's chief economist, said.
The drop in rates over the last few weeks has woken up dormant interest from buyers who stayed out of the market, scared away by exorbitant home loan costs.
Tours for homes on sale are up, according to Redfin.
"Some house hunters are dipping their toes back into the market after harsh winter weather froze them out at the start of January," Redfin said in a note.
But this increase in interest, which, according to Redfin's Homebuyer Demand Index—a measure of requests for tours and other buying services from Redfin agents—jumped 6 percent for the week ending January 28, has yet to convert into a surge in buying, real-estate agents said.
"I thought declining mortgage rates and more inventory would cause the market to take off right at the start of the new year. But even though demand has picked up some, I'm not wowed," Hal Bennett, a Redfin Premier agent in the Seattle area, said in a statement.
Over the last few weeks, the housing market has seen some fluctuations with mortgage rates ticking down but then seeing spikes only to decline slightly once again last week. The development has also witnessed a rise in home loan applications and refinancing of current mortgages.
But last week, applications for home loans fell, with experts suggesting that it was partly due to a lack of enough houses available in the market.
"Low existing housing supply is limiting options for prospective buyers and is keeping home-price growth elevated, resulting in a one-two punch that continues to constrain home purchase activity," Joel Kan, Mortgage Bankers Association's deputy chief economist, said in a statement.
The Federal Reserve's decision to hold its funds rate for the fourth time in a row while also signaling that they are unlikely to slash them in the immediate future suggests may keep mortgage rates elevated.
"[This] will probably keep mortgage rates elevated near their current level into the spring, though Redfin economists still expect them to gradually decline by the end of the year," Redfin said in its note.
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