Mortgage rates fell this week, but homebuyers are waiting for a further significant drop before entering the luxury home market.
The average interest rate on a 30-year mortgage was still below 7%, but not by much, settling at 6.91% on Thursday, according to Mortgage News Daily.
Another measure that tracks the weekly average interest rate on 30-year loans fell slightly to 6.79% from 6.87% the previous week, according to Freddie Mac.
But homebuyers largely rejected this week's decline as they wait for a potential interest rate cut at the June Federal Reserve meeting. In addition to cheaper financing, it could also encourage more sellers to list their homes, a double win for those who are holding back due to affordability.
“Purchase offers remain largely unchanged as homebuyers continue to seek lower mortgage rates and more listings on the market,” said Joel Kang, vice president and deputy chief economist at the Mortgage Bankers Association. said.
read more: Mortgage rates remain just below 7%. Is now a good time to buy a home?
Home buyers expecting relief
Mortgage applications and home purchase applications were both flat last week as consumers look forward to more affordability relief later this year.
“Lowering interest rates should help release additional inventory as the lock-in effect is reduced, but we expect that to happen only gradually,” Kang said. “Similarly, with interest rates remaining high, there is little incentive to refinance rates or terms at this time.”
Many buyers, especially first-time homebuyers, are in need of lower housing costs. U.S. home prices rose 6% in January compared to the same month last year, according to S&P CoreLogic Case-Shiller.
Brian Luke, head of commodities, real assets and digital assets at S&P Dow Jones Indices, said this is the “fastest annual rate of return since 2022.”
Southern California is experiencing extreme heat
Two Southern California cities topped the home price growth chart. San Diego reported the highest annual increase among the 20 cities, with an 11% increase in January. Los Angeles followed with a nearly 9% increase. Detroit ranked him third with just over 8%.
In Los Angeles, the prospect of lower interest rates prompted homebuyers to return to the market. Buyers in this competitive market want to secure a home now instead of waiting like in other parts of the country.
“The Fed announced interest rate cuts a few months ago, so there's a lot of competition in Los Angeles,” Nicole Han, a real estate agent in Los Angeles, told Yahoo Finance. [a home] And just refinance. ”
Bumpy ride up to the cut
The Federal Reserve left its benchmark interest rate unchanged at its March meeting, citing higher-than-expected inflation. The central bank's interest rate has been hovering in the range of 5.25% to 5.50%, the highest level since 2001.
Fed Chairman Jerome Powell said monetary policy could start easing “at some point this year.” Meanwhile, market participants are hopeful that the first rate cut could come in June.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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