After peaking near 8%, mortgage rates declined for the fifth consecutive week, averaging 7.22% as of Nov. 30. A year ago, the 30-year fixed-rate mortgage averaged 6.49%, according to Freddie Mac’s Primary Mortgage Market Survey.
“Market sentiment has significantly shifted over the last month, leading to a continued decline in mortgage rates,” says Sam Khater, Freddie Mac chief economist. “The current trajectory of rates is an encouraging development for potential home buyers, with purchase application activity recently rising to the same level as mid-September when rates were similar to today’s level. The modest uptick in demand over the last month signals that there will likely be more competition in a market that remains starved for inventory.”
Declining mortgage rates have caused a steady increase in mortgage activity, with applications increasing 0.3% for the week ending Nov. 24, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey.
‘Rates have declined more than 50 basis points over the past six weeks, which has helped to spur a small increase in purchase applications, but activity last week was still around 20% lower than a year ago,” says Joel Kan, MBA’s vice president and deputy chief economist. “The purchase market remains depressed because of the ongoing low supply of existing homes on the market. Similarly, refinance activity will likely be muted for some time, even with the recent decline in rates, as many borrowers locked in much lower rates in 2020 and 2021.”
The MBA’s refinance index decreased 9% week over week and was 1% higher than the same week in 2022. The seasonally adjusted purchase index increased 5% from a week earlier, though the unadjusted purchase index decreased 31% compared with the previous week and was 19% lower than the same week in 2022.
The declines in mortgage rates are translating in lower monthly housing prices, with Redfin reporting the typical buyer’s monthly mortgage payment was $2,575 during the four weeks ending Nov. 26, down $164 from October. However, the typical monthly mortgage payment is still 13% higher compared with November 2022 levels.
While inventory still remains tight, Redfin says new listings are up 6%—the biggest year-over-year uptick in two years.
“Mortgage rates are dropping due to easing inflation and investors betting the Fed will cut interest rates sooner than expected,” says Redfin economics research lead Chen Zhao. “Declining rates, along with a sizable year-over-year increase in new listings, are leading to more favorable conditions for some buyers.”
