The average rate for a 30-year U.S. mortgage has dropped for the fifth consecutive week, reaching its lowest point since early April. This decrease is seen as a positive development for potential homebuyers facing escalating home prices. The rate has fallen to 6.67% from 6.77% just a week prior, according to data from Freddie Mac. Comparatively, this rate was at 6.95% one year ago.
For those considering refinancing, the cost of 15-year fixed-rate mortgages has also seen a decline, dropping to 5.80% from 5.89% last week, down from 6.25% a year ago.
Although high mortgage rates have significantly impacted the housing market, adding hundreds of dollars to monthly payments and diminishing purchasing power, signs suggest a potential rebound in the coming months. The U.S. housing market has struggled since 2022 due to rising costs. Last year saw sales of previously occupied homes decline to the lowest level in nearly three decades, with sluggish sales persisting this year as many buyers have been deterred by high rates and continued increases in home prices.
However, recent indicators hint at a shift. The National Association of Realtors reported a 1.8% increase in pending home sales for May compared to the previous month, marking a 1.1% rise from a year earlier. As pending home sales often precede finalized sales by a month or two, this trend could be a signal of future growth in market activity.
The decrease in mortgage rates reflects trends in the bond market, with the yield on the 10-year Treasury bond falling to 4.33%, a sharp drop from 4.58% a few weeks ago. The average 30-year mortgage rate has remained close to its peak of just above 7% earlier this year, reaching a low of 6.62% in early April.
Interestingly, the recent mortgage rate decline has seemingly motivated homebuyers, as mortgage applications reportedly rose by 2.7% last week. Economists project that mortgage rates are likely to stabilize between 6% and 7% throughout the remainder of the year, providing cautious optimism for potential buyers as they navigate a challenging housing market.
Overall, with mortgage rates on the decline and a slight uptick in pending sales, the housing market may be on the verge of a more positive trajectory, offering hope to borrowers in search of new homes.