The average rate for a 30-year fixed-rate mortgage increased to 6.39% for the week ending April 20, 2023, according to the latest data by Freddie Mac. That’s up from the previous week when it averaged 6.27% and from last year when it averaged 5.11%.
The average rate for a 15-year fixed-rate mortgage increased to 5.76%, up from 5.54% the previous week and 4.38% last year.
"Home prices have stabilized somewhat, but with supply tight and rates stuck above six percent, affordable housing continues to be a serious issue for potential homebuyers," Freddie Mac Chief Economist Sam Khater said. "Unless rates drop into the mid-5% range, demand will only modestly recover."
Housing supply has been on the decline in recent months, according to the latest housing market update by Redfin, which covered the four-week period ending April 9th. In fact. New listings of U.S. homes for sale dropped 25% from a year prior. That marked the eighth month in a streak of double-digit declines and the sharpest plummet since the COVID-19 pandemic began.
The lack of available housing may be tied to the lock-in effect, which suggests that people who took out mortgages amid historically low interest rates at the start of the pandemic may be hesitant to list their homes.
"People are reluctant to sell because they don’t want to give up their low mortgage rate," Redfin said in its report. "It’s hard to find another home to buy and many Americans recently moved."
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Will the Fed keep raising interest rates?
Mortgage rates have increased following a recent downward trend, but the overall interest rate environment remains uncertain.
To quell high inflation, the Federal Reserve has been raising interest rates since last year. In its last meeting in March, the central bank increased interest rates by 25 basis points. The move came after many economists had predicted a loosening of monetary policy in the wake of bank closures.
When speaking of concerns in the banking system following the Fed’s March meeting, Federal Reserve Chairman Jerome Powell said, "It is too soon to determine the extent of these effects and therefore too soon to tell how monetary policy should respond. As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation."
But despite signs of cooling economic growth, inflation remains far from the Fed’s target range of 2%.
"The Fed has made some progress cooling inflation with rate hikes but there’s still work to be done," Redfin Chief Economist Daryl Fairweather said in a statement. "Even if the Fed chooses not to hike rates next month, which would likely bring down mortgage rates, the limited supply of homes for sale would remain a major obstacle for would-be buyers. Rates dipping below 6% would probably pique the interest of more buyers, but enough homeowners have rates in the 3% or 4% range that we’re unlikely to see a big uptick in new listings."
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Home prices cool off
While potential homebuyers may see higher mortgage rates today, home price growth has been slowing down, according to the latest data by Fannie Mae.
Single-family home prices increased by 4.7% year-over-year in the first quarter of 2023, Fannie Mae reported. However, that marked a drop from the previous quarter's revised annual growth rate of 8.6%.
"As expected, the annual rate of increase in home prices has slowed dramatically in response to the rapid and significant increase in interest rates," Doug Duncan, Fannie Mae senior vice president and chief economist, said in a statement.
In addition, the median U.S. home-sale price is roughly $364,000, down 2.3% year-over-year, according to Redfin's latest housing market update.
Home-sale prices have declined in 29 of the 50 most populous U.S. metros, Redfin said. Here are the areas that have seen the largest year-over-year drops in home prices.
- Austin (-13.9%)
- Oakland (-11.4%)
- San Francisco (-10.9%)
- Seattle (-10.9%)
- Sacramento (-10.6%)
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