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Mortgage rates dip, offering relief to homebuyers

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  • Staff Report 

After four consecutive weeks of increases, mortgage rates experienced a slight decrease this week, offering a glimmer of hope to potential homebuyers. The 30-year fixed-rate mortgage averaged 6.88%, down from 6.94% last week, according to Freddie Mac. This time last year, the rate stood at 6.73%.

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Sam Khater, Freddie Mac’s chief economist, highlighted the sensitivity of purchase demand to interest rate fluctuations, noting a rise in mortgage applications for the first time in six weeks in response to the rate drop. This shift indicates that even a minor decrease in rates can significantly impact buyer activity, particularly as the spring housing market begins to heat up.

The Mortgage Bankers Association reported a 9.7% increase in mortgage applications from the previous week, with purchase loans seeing an 11% rise and refinances up by 8%. The uptick in Federal Housing Administration loan applications suggests first-time buyers are particularly active, drawn by the more accessible conditions.

Despite this positive movement, challenges remain for those entering the housing market. High mortgage rates, combined with low inventory, have made affordability a significant hurdle. However, the recent trend towards more homes being listed for sale—Redfin noted a 13% year-over-year increase in new listings—offers some relief by providing buyers with more options.

The increase in new listings, particularly in 70% of metro areas, contradicts previous beliefs that significant rate drops were needed to encourage selling. Instead, life events such as marriages, new babies, or relocations are prompting more homeowners to enter the market, according to Lisa Sturtevant, chief economist at Bright MLS.

As the housing market continues to evolve, all eyes will be on the Federal Reserve for signs of future rate movements. Testimony from Fed Chair Jerome Powell and the upcoming jobs report could influence mortgage rates in the short term. While rates are anticipated to decline further in 2024, the timing and extent of these adjustments remain uncertain, making it crucial for buyers and sellers to stay informed and prepared.

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