In breaking news, mortgage rates have fallen this week to their lowest level since early April, providing some relief to America’s housing market. According to Freddie Mac, the standard 30-year fixed-rate mortgage averaged 6.87% in the week ending June 20, down from last week’s 6.95% average. This marks the third consecutive weekly decline, with rates dropping from a peak of 7.22% in 2024.
Freddie Mac’s chief economist, Sam Khater, stated, “Mortgage rates fell for the third straight week following signs of cooling inflation and market expectations of a future Federal Reserve rate cut. These lower mortgage rates, coupled with the gradually improving housing supply, bodes well for the housing market.”
Despite the recent decline, mortgage rates remain higher than anything seen in the decade before 2022 when the Federal Reserve began to raise interest rates to combat inflation. Economists do not anticipate the average mortgage rate to fall below 6% this year.
In related news, new home construction was weaker than expected in May, with a seasonally adjusted annual rate of 1.28 million units, the lowest level since 2020, and down by 5.5% from April. Building permits, seen as a forward indicator of future construction, also fell below economists’ expectations. Additionally, sentiment among America’s homebuilders dropped to its lowest level since December.
NAHB Chairman Carl Harris commented, “Persistently high mortgage rates are keeping many prospective buyers on the sidelines. Home builders are also dealing with higher rates for construction and development loans, chronic labor shortages, and a dearth of buildable lots.”
The lack of homes on the market has been a longstanding issue for housing in America, and sluggish homebuilding exacerbates the problem. Furthermore, home prices remain high, with the S&P CoreLogic Case-Shiller US National Home Price Index rising 6.5% in March from a year earlier to a record high.
The annual Demographic International Housing Affordability report highlighted that America’s most expensive housing markets are in California, with Honolulu, Hawaii also listed as one of the most expensive in the world. Buyers are facing the challenge of coming up with a down payment that is roughly double the median salary of a US worker.
In response to these challenges, some individuals are making significant financial sacrifices or looking for outside help to afford a home. Chief economist at Zillow, Skylar Olsen, noted, “Saving enough is a tall task without outside help – a gift from family or perhaps a stock windfall. To make the finances work, some folks are making a big move across the country, co-buying, or buying a home with an extra room to rent out.”
