As home prices continue to surge, buyers may welcome even a slight dip in borrowing costs as they face affordability constraints.
The 30-year fixed-rate mortgage averaged 6.78% this week, backing away from its near-7% mark last week. “That relief is welcome at a time when the St. Louis Fed is reporting there are tighter lending standards now for consumers seeking mortgages,” says Jessica Lautz, deputy chief economist and vice president of research at the National Association of REALTORS®. “Simultaneously, home prices have now hit the second-highest amount recorded since January 1999.”
For a buyer purchasing a $410,200 home—the median price of an existing home in June—that translates to a mortgage payment of $2,135 at today’s mortgage rate, Lautz says. “This is out of reach for many first-time buyers, as the median qualifying income would need to be $102,480.”
Besides higher rates, buyers are up against a deep housing shortage. Thirty-three percent of homes sold above the list price in June due to housing inventory, which has hit its lowest level in four decades, Lautz says.
Many homeowners may be reluctant to sell out of fear they wouldn’t find or couldn’t afford another home in this bare market. Lower mortgage rates could help counter that somewhat, Lautz says. “While new inventory is needed, lower rates would bring current owners out of their homes they may have outgrown and into the market,” she adds.
Here’s a closer look at mortgage rates for the week ending July 20, according to Freddie Mac’s weekly mortgage market index:
- 30-year fixed-rate mortgages: averaged 6.78%, falling from last week’s 6.96% average. A year ago, 30-year rates averaged 5.54%.
- 15-year fixed-rate mortgages: averaged 6.06%, dropping from last week’s 6.3% average. This time last year, 15-year rates averaged 4.75%.
“Borrowers should remember that an average rate isn’t the exact rate that everyone will be offered,” says Jacob Channel, senior economist at LendingTree. “Owing to this, while home buyers can generally expect lenders to offer rates near what the current average is, they should also remember that other factors like their personal credit score and income will also play a large role in the specific rate they get.” Channel urges borrowers to shop around among different lenders and gather several rate quotes.
Source: nar.realtor
