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By Omar Mohammed
Reporter, Economy & Finance
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Mortgage rates fell to their lowest in months amid indications that borrowing costs might come down later in the year, a development that could help with affordability for prospective homebuyers at a time when supply of properties in the market was showing signs of improvement.
The 30-year fixed rate mortgage fell again as it averaged 6.77 percent as of July 18, compared to the previous week's 6.89 percent. Meanwhile, this week's average was closer to where it was a year ago when it stood at 6.78 percent, according to Freddie Mac. The 15-year fixed rate was even lower, averaging a little over 6 percent for the period, almost unchanged from where it was at the same time last year.
"The 30-year fixed-rate mortgage fell to its lowest level since mid-March, dropping 12 basis points from last week," Sam Khater, Freddie Mac's chief economist, said in a statement on Thursday. "Mortgage rates are headed in the right direction and the economy remains resilient, two positive incremental signs for the housing market."
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Borrowing costs for home loans soared after the Federal Reserve hiked rates at an aggressive pace not seen since the 1980s to battle soaring inflation. At the same time, prices for homes shot up amid heightened demand prior to the central bank's tightening of financial conditions. The increased interest in home purchases was met with diminished supply of homes in the market, contributing to the rise in prices.
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Inflation fell in June, closer to the Fed's target of 2 percent, and inventory of homes for sale has grown, which has helped to bring down prices, particularly in the South and the Sun Belt.
On Wednesday, the U.S Census Bureau revealed that newly completed homes rose last month by 10 percent and was up 15.5 percent from a year ago to 1.7 million. Analysts suggest that the development will help in the supply crunch of homes, which could mitigate against high prices.
But Khater warned that a decline in mortgage rates may not spark a rush of homebuying right away.
"Homebuyers have yet to respond to lower rates, as purchase application demand is still roughly 5 percent below spring, when rates were approximately the same," he said in the statement.
"This is not uncommon. Sometimes as rates decline, demand weakens, and the apparent paradox is driven by buyers making sure rates don't decline further before they decide to purchase."
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