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Weekly Mortgage Rates Fall, But Existing Home Sales Sag

2 months ago
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Weekly Mortgage Rates Fall, But Existing Home Sales Sag

Despite declining mortgage rates, home sales continue to struggle

InVastor News /

In a promising turn of events, mortgage rates have dropped for the third consecutive week, just as the homebuying season kicks off. However, the relief provided by lower rates might not be enough to entice potential buyers, as existing home sales experienced a slump in April and show no signs of significant improvement in May. This blog post examines the impact of falling mortgage rates on the housing market and delves into the reasons behind the ongoing decline in home sales.

Decline in Mortgage Rates: The average rate on the 30-year fixed-rate mortgage fell to 6.87% in the week ending May 23, marking an 11 basis points drop from the previous week. While this decline is notable, it has not translated into a surge in home sales as one might expect. Joel Kan, deputy chief economist for the Mortgage Bankers Association, highlights the continued lag in purchase activity despite the recent rate decrease. Slump in Home Sales: A combination of high mortgage rates, inflated prices, and limited inventory has weighed heavily on home sales in April. According to the National Association of Realtors, existing home sales reached an annual pace of 4.14 million dwellings, reflecting a 1.9% decline compared to both the previous month and the previous April. This downward trend raises concerns for sellers as the crucial four-month homebuying season commences. Buyer Reluctance: While sellers have been proactive in listing their homes ahead of the spring shopping season, buyers have been hesitant to enter the market due to the sharp increase in mortgage rates during March and April. Despite the recent decline in rates, they still remain slightly higher than the levels seen earlier in the year. This hesitancy among buyers dampens the prospects for a robust start to the homebuying season.

"Lower mortgage rates later this year will provide a breather, though the average potential home buyer continues to maintain a wait-and-see approach."

Selma Hepp, Chief Economist for CoreLogic

Although mortgage rates have fallen for three consecutive weeks, the impact on the housing market has been less than expected. Existing home sales have struggled due to a combination of factors, including high mortgage rates, elevated prices, and limited inventory. The reluctance of buyers to enter the market despite the recent rate decline suggests a cautious approach to homebuying. However, there is hope that a potential cut in short-term interest rates by the Federal Reserve in the fall could provide some relief and stimulate the market. As the homebuying season progresses, it remains to be seen whether these factors will continue to hinder or eventually spur home sales.


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