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Mortgage rates shot back up this week, with the average rate for a 30-year fixed home loan rising from 6.94% last week to 7.03% for the week ending May 30, according to Freddie Mac.
“Following several weeks of decline, mortgage rates changed course this week,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “More hawkish commentary about inflation and tepid demand for longer-dated Treasury auctions caused market yields to rise across the board. This reality, as well as economic signals that have moved sideways over the last few weeks, have resulted in mortgage rates drifting higher as markets continue to dial back expectations of interest rate cuts.”
When mortgage rates finally fell below 7% last week, the dip seemed to give the housing market a jumpstart it sorely needed this spring.
“In response to rates resuming their decline, more home sellers opted to list their homes for sale, as growth in new listings increased from the week prior,” says Realtor.com® senior economist Ralph McLaughlin in his latest analysis.
Here’s a look at the latest housing market metrics and what they mean for homebuyers and sellers in our most recent installment of “How’s the Housing Market This Week?”
Mortgage rates are predicted to remain elevated
Mortgage rates are likely to remain high through the summer, due to the latest indicators from the Federal Reserve.
While the Fed’s interest rates are not tied to mortgage rates, the two numbers usually move in the same direction. The Fed had been expected to cut rates three times this year, which may now turn out to be just one cut.
“Earlier this year, the market anticipated the first rate cut to occur in March, but current economic data indicates that a cut is unlikely before September,” said Realtor.com Economist Jiayi Xu in a statement. Xu adds that “more investors are now anticipating just one rate cut this year.”
Home prices continue to rise slowly
The median price for a home rose slightly by 0.5% year-over-year for the week ending May 25.
“This was the highest listing price growth rate since February,” says McLaughlin.
The uptick marks the second consecutive week where prices rose. Prior to that, home prices spent 11 weeks with no or negative annual price growth. (The median-priced home cost $430,000 in April.)
“In recent months, listing price growth has remained muted as a greater share of more affordable homes were available for sale compared to the same time last year,” explains McLaughlin. “Home inventory, despite gains compared to last year, still remains below pre-pandemic levels and continues to provide a floor to listing prices.”
Housing stock continues to grow
New listings rose by 3.6% for the week ending May 25 compared to the same week last year. While any fresh homes hitting the market is positive news, this week’s data marks a slowdown from the 8.1% growth rate in the previous week.
“Earlier in May, we saw sellers—many of whom are themselves buyers—cautiously pull back from listing their homes as mortgage rates increased and growth in new listings decelerated,” explains McLaughlin.
On the bright side for homebuyers, overall inventory was up 36.5% for the week ending May 25 compared to the week prior for the 29th straight week.
The uptick in housing stock “was the highest since July 2020 in the early days of the COVID-19 pandemic,” says McLaughlin.
Home shoppers looking for the most houses for sale should head South, where the housing stock shot up 43.0% year over year in April.
Homes are selling more slowly
Homes lingered an extra two days on the market for the week ending May 25 compared to this time the year prior. (The typical home spent 47 days on the market in April.)
“Recent increases in mortgage rates have resulted in both buyers and sellers acting more cautiously, with homes churning at slightly lower rates than last year,” says McLaughlin.
Homebuyers should note, however, that while homes may be selling slightly more slowly than last year, they are selling more quickly overall than before the pandemic as housing stock comes back online.
“As existing homeowners report feeling “locked in” by today’s mortgage rate, many choose not to sell and wait for lower rates,” says Xu. “Meanwhile, the increasing listing activities in recent months suggested that other sellers have adjusted their expectations and jumped back into the market.”